The Trump administration's month-long travel ban on European visitors significantly has worsened the prognosis for survival of major global airlines without government intervention, industry leaders warned Thursday.
The ban, announced by President Trump on Wednesday night, affects passengers on about 7,000 flights during the ban's duration, representing about 2 million seats each way, according to OAG analyst Becca Rowland. Together, Delta Air Lines and United Airlines alone account for 31 percent of flights between the U.S. and the Schengen Area, while Lufthansa accounts for 13 percent of flights.
The U.S. carriers already have been raising cash to get through the coming weeks while deferring spending, non-essential maintenance and other costs, Cowen analyst Helane Becker said in a research note.
"We continue to believe near-term U.S. bankruptcies are unlikely, but our conviction is diminishing," she said. "If bookings do not improve in the next three months, things could deteriorate quickly."
The International Air Transport Association already had estimated that the Covid-19 outbreak could cost airlines about $113 billion in revenue globally. That estimation did not include a U.S. ban on travelers from the Schengen Area—the total market value of which last year was $20.6 billion—as well as other draconian measures since introduced on travel by countries including Israel, Spain and Kuwait, according to IATA.
Without "emergency measures" by governments for airline, more airlines will suffer the same fate as Flybe, which entered administration and ceased operations last week, according to IATA director general and CEO Alexandre de Juniac.
"Governments should be looking at all possible means to assist the industry through these extreme circumstances," according to de Juniac. "Extending lines of credit, reducing infrastructure costs, lightening the tax burden are all measures that governments will need to explore. Air transport is vital, but without a lifeline from governments we will have a sectoral financial crisis piled on top of the public health emergency."
De Juniac also urged governments to follow World Health Organization guidance on travel restrictions, in that they are justifiable at the beginning of an outbreak but should be "based on a careful risk assessment, be proportionate to the public health risk, be short in duration and be reconsidered regularly as the situation evolves,” he said.
"Governments must impose the measures they consider necessary to contain the virus," according to de Juniac. "And they must be fully prepared to provide support to buffer the economic dislocation that this will cause."
The Trump administration's move has puzzled some in the industry, in that it exempted the United Kingdom and Ireland, which have higher infection rates than some countries within continental Europe, and that it comes after the virus has clearly already been spreading within the United States. The EU has denounced it as too extreme, according to Becker.
"What is absolutely clear to us is that there is zero predictability to the fear that exists and the actions being taken, making it nearly impossible to get ahead of," she said.