As consumer confidence is shaken and business plans are disrupted, the damage is likely to go well beyond tourism. United States President Donald Trump temporarily banned most travelers Europe from the United States. It has struck him at the lifeblood global commerce. Thus, it restricted the further flow of business people and tourists across borders. It put the world’s economy in tremendous jeopardy.
From hotels to amusement parks to airlines and hotels, the abrupt halt will shake tourism-dependent industries on both sides of the Atlantic. It will disrupt ambitious business plans. It adds to the problems of world leaders who are already wrestling with the relentless coronavirus outbreak. And with the threat, it poses to livelihoods and jobs.
As governments around the world tighten and even close their borders to stop the outbreak, it adds to the world’s growing isolation. That will also hammer the consumer’s confidence on a global scale. They are watching the news of the pandemic, and increasingly and rationally choosing to keep their wallets closed and stay home.
On Wednesday, Trump announced that he would suspend travel from Europe to the United States for 30 days, excluding Britain. Thus, on Thursday, shares in European airlines were hammered. The State Department warned Americans that they need to reconsider all international travel, the most severe caution it can offer short of “do not travel.”
Leisure and travel stocks slumped nearly 10 percent on the benchmark Stoxx 600 index. Meanwhile, as the sector braced for an almost unprecedented brake on activity, the European airline shares plunged as much as 20 percent. IAG, Air France, and Lufthansa, the owner of British Airways and Iberia, fell as much as 13 percent. The cruise ship operator, Carnival’s shares, fell to 11-year lows.
The questions are raised concerning the possibility of potential layoffs and work furloughs. Ciampino Airport, In Rome, a hub for low-cost airlines, announced Thursday it would shutter entirely as of Friday because of the outbreak. Rome’s Fiumicino Airport hosts international flights. The airport is bracing for reduced activity, said its operator.
In Asia, the move worsened a stock market slump, and it sent airlines and other industries scurrying for answers. Excluding those from Britain, European visitors to the United States totaled nearly 11 million in 2018. That accounts for more than a quarter of all travelers.
Tourism and travel between Europe and the United States, including areas not covered by the ban, according to the United States data, is a business totaling roughly $130 billion annually. As airlines that can not bring European travelers to the United States are unlikely to maintain a large number of flights going the other way, the blow will be felt in both regions.
Moreover, airlines have already been cutting routes across the Atlantic as travelers increasingly chose to stay home. Nevertheless, the industry will take an immediate hit.
Air France KLM’s revenue is from the North American business. It includes destinations outside the United States. Last year it totaled $4 billion, or about 13 percent of its sales.
All in all, let’s hope that the situation will change towards better results.
- Trading Instrument