Real killer blow: Global airline stocks plunge on Trumps travel ban and analysts expect a 30%-50% drop

Reuters

• Global stocks plummeted after President Donald Trump imposed travel restrictions from several European countries.
• The European travel and leisure index was down nearly 10%, while US airline stocks dropped more than 10% in pre-market.
• One analyst said the global airline industry has lost $41 billion in just one month due to the growing risk surrounding coronavirus. 
• Visit Business Insider’s homepage for more stories.

Airline stocks across the globe are plunging after US President Donald Trump announced travel restrictions from several countries in Europe in order to curb the growing risk of coronavirus. 

On Wednesday, Trump announced that the US will ban all travel from 26 European countries by non-US citizens and permanent residents. 

While global stocks slipped into turmoil, individual airline stocks nosedived on the news. On Thursday, the European travel and leisure index was down 10% with major airlines such as Air France-KLM, Lufthansa and British Airways-owned IAG down more than 10%. Shares in plane-maker Airbus dropped 9% in the morning trading. 

“The real blood bath is going to be in the travel and leisure industry. I am expecting this industry to fall as much as 30% to 50%,” Naeem Aslam, chief markets analyst at AvaTrade told Business Insider on Thursday. 

“Out of all the other sectors, this could be the most fruitful short trade for investors given the global lockdown situation that we are facing because of coronavirus. I expect bigger companies to take advantage of the available credit lines now and buy smaller players. So, towards the end of this year or third quarter, we are likely to hear more mergers and acquisition news.”

Stateside, Boeing shares dropped 42% in pre-market trading. Meanwhile, major airlines were also down across the board. United Airlines dropped more than 10%, while Delta was down more than 6% in pre-market trading. 

“Coming after such a torrid time for airline stocks the ban is a real killer blow. We don’t know how long it will last, and the Transatlantic business is so huge. Those with good balance sheets will be ok, but there are plenty of airlines that are not in good shape and will go under,” Neil Wilson, chief markets analyst at Markets.com, told Business Insider on Wednesday. 

Airlines have lost $41 billion of value in one month

The global airline industry has been on a rollercoaster ride since the start of the coronavirus pandemic. According to Russ Mould, Investment Director at AJ Bell, the global airline industry has lost more than $40 billion of its value in one month. 

In a note last week, AJ Bell’s Mould said that as investors try and work out the impact of coronavirus on the global economy, the global airline sector has taken a “fearsome battering.” 

“The global airline sector’s market capitalization has dropped by $40.6 billion, or 25%, in the last month alone. The sector’s valuation now stands at a five-year low and 45% below its January 2018 peak of $205 billion, as benchmarked by the S&P Global 1200 airlines index,” he wrote.