The new European travel restrictions will hit airlines hard

Mar 12, 2020

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

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.

Related: UK’s largest domestic airline Flybe collapses

Featured image by Boris Roessler/picture alliance via Getty Images.

Delta SkyMiles® Platinum American Express Card

Earn 90,000 bonus miles after you spend $3,000 in purchases on your new Card in your first 3 months. Offer ends 8/3/2022.

With Status Boost™, earn 10,000 Medallion Qualification Miles (MQMs) after you spend $25,000 in purchases on your Card in a calendar year, up to two times per year getting you closer to Medallion Status. Earn 3X Miles on Delta purchases and purchases made directly with hotels, 2X Miles at restaurants and at U.S. supermarkets and earn 1X Mile on all other eligible purchases. Terms Apply.

Apply Now
More Things to Know
  • Limited Time Offer: Earn 90,000 bonus miles after you spend $3,000 in purchases on your new Card in your first 3 months. Offer ends 8/3/2022.
  • Earn up to 20,000 Medallion® Qualification Miles (MQMs) with Status Boost® per year. After you spend $25,000 in purchases on your Card in a calendar year, you can earn 10,000 MQMs up to two times per year, getting you closer to Medallion® Status. MQMs are used to determine Medallion® Status and are different than miles you earn toward flights.
  • Earn 3X Miles on Delta purchases and purchases made directly with hotels.
  • Earn 2X Miles at restaurants worldwide including takeout and delivery in the U.S., and at U.S. supermarkets.
  • Earn 1X Miles on all other eligible purchases.
  • Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. Payment of the government imposed taxes and fees of no more than $80 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
  • Enjoy your first checked bag free on Delta flights.
  • Fee Credit for Global Entry or TSA PreCheck® after you apply through any Authorized Enrollment Provider. If approved for Global Entry, at no additional charge, you will receive access to TSA PreCheck.
  • Enjoy an exclusive rate of $39 per person per visit to enter the Delta Sky Club® for you and up to two guests when traveling on a Delta flight.
  • No Foreign Transaction Fees.
  • $250 Annual Fee.
  • Terms Apply.
  • See Rates & Fees
Regular APR
17.24%-26.24% Variable
Annual Fee
Balance Transfer Fee
Recommended Credit
Terms and restrictions apply. See rates & fees.

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.