Airline stocks are down—a lot. They were yesterday, too, and last week, a downward trend ignited by the coronavirus, but this time it feels different. Before, airlines were canceling flights, reducing hiring, and even offering flights to the general public for a penny. Then, the idea of there being airline stocks down was worrying, don’t get us wrong, but it wasn’t President Trump-announcing-a-European-travel-ban bad.
That changed on Wednesday, however.
Airline Stocks Down: The Lead-Up
Airlines have been doing their part to fight the recently declared pandemic, but in the United States, many have criticized President Trump for taking the crisis too lightly. To counter that, Trump announced a 30-day European travel ban on Wednesday. Going into effect Friday, Trump has restricted travel to the US from over two dozen countries in Europe. These countries include Italy, where the death toll has recently increased to 30%, France, Germany, and Spain.
President @realDonaldTrump has taken bold action in response to the #Coronavirus. The steps the President announced in regard to Europe protect the American people — our highest priority — and are part of the most comprehensive effort to confront a virus in modern history.
— Secretary Pompeo (@SecPompeo) March 12, 2020
The President’s administration has stated that the ban isn’t as drastic as many believe, with the Trump European travel ban only applying to foreign nationals. American citizens who have been screened before entering the country are safe, an add-on to the prohibition that mimics the constraints he applied to China in February.
Tell that to the airline stocks down today, Mr. Trump. And to the Americans who rely on travel for their jobs. As stated by Roger Dow, CEO of the US Travel Association:
“Temporarily shutting off travel from Europe is going to exacerbate the already heavy impact of coronavirus on the travel industry and the 15.7 million Americans whose jobs depend on travel.”
Most people are aware that the coronavirus is impacting the global economy, even giving blows to the cannabis industry. And while lots of attention is on how airlines are canceling flights, many are ignoring the fact that the airline industry is facing billions of dollars in lost sales—the International Air Transport Association says it could stand to lose $113 billion if things get worse—because of COVID-19.
Yes, I know, surprise surprise: canceled flights don’t just mean your holiday plans are ruined. And the Trump European travel ban, which has further pushed many airline stocks down today, is the tip of the iceberg. Even airline stocks like British Airways’ parent company IAG (OTCPK:ICAGY) dropped 10% in London Thursday. This drop comes despite the United Kingdom and Ireland being excluded from the US’s ban.
Other airline stocks down today include Air France-KLM (OTCPK:AFLYY), Lufthansa (OTCQX:DLAKY), and Norwegian Air (OTCPK:NWARF). According to CNN, Air France-KLM was down 11% in Paris, while Lufthansa, a German airline, dropped Thursday, taking its losses in 2020 above 40%. And it’s only March. It gets worse for Norwegian Air, which crashed 24%, bringing 2020 losses to 80%.
The many airline stocks down today is a concern for the industry, the companies, and investors. But some stand to lose more than others. For example, American Airlines (NASDAQ:AAL) and Delta (NYSE:DAL) are among those that could be impacted the most by the Trump European travel ban.
In premarket trading, Delta shares were down 11%. At the time of writing, DAL stock is trading at $36.57, which puts the airline stock down 14.32%. American Airlines is down 9.53% at the time of writing.
These plunges, of course, are not the reason why we’re saying these airlines will be the most impacted by the ban. Trump’s announcement made it inevitable that there would be some airline stocks down. We say this because these three airlines, as well as Germany’s Lufthansa, hold the most significant share of the market for transatlantic flights; that’s according to CNN and Berstein analyst Daniel Roeska.
A Combination of Things
Between the actual coronavirus, the precautions airlines have already taken, and Trump’s new travel ban, we suspect today will not be the only time we see airline stocks down. Even the International Air Transport Association recognizes this: if the coronavirus worsens, and the global airline industry loses nearly $120 billion in sales, the sector will be in a situation similar to the aviation industry during the 2008 financial crisis.
We all remember how that went.
Featured image: PixaBay