The new European travel restrictions will hit airlines hard
The new restrictions on travel between Europe and the U.S. will take a steep toll on airlines already hard hit by the drop in travel demand amid the novel coronavirus pandemic.
Unveiled by the Trump administration on Wednesday night, the restrictions limit travel by non-Americans to the U.S. from Europe's Schengen Area. President Trump said the restrictions will be in place for 30 days from Friday.
American Airlines, Delta Air Lines and United Airlines will take the brunt of the hit in the U.S., while Air France-KLM, the Lufthansa Group of carriers, and Norwegian are likely to be hit hardest in Europe. The impact on British Airways and its parent the International Airlines Group (IAG) will likely be less as the restrictions do not include travel from Ireland and the UK.
Sign up for the free daily TPG newsletter for more airline news
"This will create enormous cash-flow pressures for airlines," said Alexandre de Juniac, director general of the industry organization the International Air Transport Association (IATA), on Thursday. The organization estimates the value of air connections between the U.S. and countries in the Europe's Schengen area at $20.6 billion in 2019, with the largest being the U.S.-Germany market.
The European travel restrictions also reinforce comparisons between the current crisis and 9/11, after which the U.S. grounded all flights for four days after the 2001 attacks. JetBlue CEO Robin Hayes has repeatedly warned that the impact of coronavirus fears on travel demand "could be worse than 9/11."
After 9/11, it took 15 months — or until December 2002 — before monthly passenger numbers in the U.S. exceeded their pre-attack levels, according to U.S. Bureau of Transportation Statistics data. However, it took until 2004 for year-over-year growth rates to exceed their pre-9/11 levels.
Related: US airline execs warn coronavirus impact 'could be worse than 9/11' downturn
The European travel restrictions are likely to impact some airlines more than others. Just eight airlines accounted for more than 70% of capacity between Continental Europe and the U.S. in 2019, according to Cirium schedules. High on that list are Lufthansa and its partner United, and Delta and its partners Air France and KLM.
Below is the percentage of total Continental Europe-U.S. capacity each of the aforementioned eight carriers flew last year:
- Lufthansa: 15.8% of capacity
- Delta: 14.1%
- United: 12.1%
- Air France: 8.2%
- American: 6.2%
- KLM: 5%
- Norwegian: 4.5%
- Swiss: 4.2%
What flights these airlines cancel is still to be determined. As of noon on Thursday, only Finnair had cancelled all of its flights to the U.S. More changes in the market are likely to come.
Related: Coronavirus-related U.S. airline flight suspensions and waivers
The financial impact of the European travel restrictions will play a big role in what airlines look like when they emerge from the crisis. The list below shows roughly how much revenue the above carriers, or their corporate owners, generate on transatlantic routes:
- Lufthansa Group (Austrian Airlines, Brussels Airlines, Lufthansa and Swiss): 31.4% of revenues
- Air France-KLM: 21.8%
- Norwegian: roughly 19%
- United: 17.1%
- Delta: 15.1%
- American: 11%
Each airline breaks out geography-specific revenues differently. In addition for the U.S. carriers, these numbers include revenue on flights to Ireland and the UK that are not impacted by the travel restrictions.
The U.S. carriers are generally well capitalized an, barring an extended COVID-19 related downturn, are expected to be able to weather the crisis. However, European carriers are not as strong financially and are likely to face heightened pressures from the new travel restrictions.
Related: United to extend coronavirus-related capacity cuts into summer
"We believe the abrupt halt, however, is likely to further spur consolidation in the European industry with Norwegian's transatlantic markets... further stressing its already questionable going concern," wrote Raymond James analyst Savanthi Syth on Thursday morning.
Norwegian, whose finances have long been in question, restructured its transatlantic flying last year. The airline planned to end underperforming routes, for example those between the U.S. and Copenhagen (CPH) and Stockholm (ARN), by March with a renewed focus on its strongest routes in the region.
UK regional carrier Flybe has already shutdown due to the drop in demand amid COVID-19 fears. And, if 9/11 is any guide, more airline names could disappear in the months to come.
"This will wreak havoc on the airline industry," wrote Cowen analyst Helane Becker in a research note Thursday morning.
TPG featured card
at American Express's secure site
Terms & restrictions apply. See rates & fees.
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 5X | New! Earn 5X Membership Rewards® points on prepaid hotel stays booked through AmexTravel.com or the Amex Travel App. |
| 3X | Earn 3X Membership Rewards® points on flights booked through AmexTravel.com, the Amex Travel App, or purchased directly from airlines. |
| 2X | Earn 2X Membership Rewards® points on prepaid car rentals booked through AmexTravel.com or the Amex Travel App and cruises booked and paid through AmexTravel.com. |
| 1X | Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases. |
Pros
- Valuable dining and food-related credits
- Flexible rewards with airline and hotel transfer partners
- Multiple travel and purchase protections
- No foreign transaction fees
- Access to Amex Offers for additional savings (enrollment required)
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $8,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- New! Earn 5X Membership Rewards® points on prepaid hotel stays booked through AmexTravel.com or the Amex Travel App.
- Earn 3X Membership Rewards® points on flights booked through AmexTravel.com, the Amex Travel App, or purchased directly from airlines.
- Earn 2X Membership Rewards® points on prepaid car rentals booked through AmexTravel.com or the Amex Travel App and cruises booked and paid through AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- Pay It® lets you tap in the American Express® App to quickly pay for small purchase amounts throughout the month and still earn rewards the way you usually do. Plan It® gives you the option to split up big purchases into equal monthly payments with a fixed fee. You’ll know upfront exactly how much you’ll pay.
- Updated! $120 Dining Credit: Earn up to a total of $10 in statement credits monthly when you pay with the Gold Card at Grubhub (including Seamless), Buffalo Wild Wings, Five Guys, The Cheesecake Factory, and Wonder. This can be an annual savings of up to $120. Enrollment required.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year at over 10,000 qualifying U.S. Resy restaurants after you pay for eligible purchases with the American Express® Gold Card. That’s up to $50 in statement credits semi-annually. Enrollment required.
- $84 Dunkin' Credit: Earn up to $7 in monthly statement credits after you pay with the American Express® Gold Card at U.S. Dunkin’ locations. Enrollment required.
- $120 Uber Cash on Gold: Enjoy up to $120 in Uber Cash annually with your Gold Card. Just add your Card to your Uber account and you'll get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an Amex Card for your transaction.
- New! As an American Express® Gold Card Member, you can enjoy complimentary Hertz Five Star® Status. Enjoy benefits like skipping the counter at select locations, adding an additional driver at no additional cost*, and vehicle upgrades**. Benefit enrollment and Hertz Gold+ registration are required. *Additional drivers must meet standard rental qualifications and must be a spouse or domestic partner to qualify as complimentary. Other additional drivers subject to fees. **Benefits are subject to availability and vary by location. Additional Hertz program Terms and Conditions including age restrictions apply.
- Take advantage of a $100 credit towards eligible charges* at over 1,300 upscale hotels worldwide when you book The Hotel Collection through AmexTravel.com or the Amex Travel App **. *Eligible charges vary by property. **The Hotel Collection requires a two-night minimum stay.
- Book your travel through the Amex Travel App with added peace of mind – backed by American Express® service and support. Only for American Express® Card Members.
- Whenever you need us, we're here. Our Member Services team will ensure you are taken care of. From lost Card replacement to statement questions, we are available to help 24/7.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.