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With Trump’s Europe Travel Ban, World Economy Takes Another Hit With Trump’s Europe Travel Ban, World Economy Takes Another Hit
(about 4 hours later)
By temporarily banning most European travelers from the United States, President Trump has struck at the lifeblood of global commerce, further restricting the flow of business people and tourists across borders and putting the world’s economy in greater jeopardy. President Trump’s abrupt decision to shut America’s borders to most European travelers sowed chaos at the Continent’s airports and at travel-related businesses Thursday, as airlines scrambled to figure out how to halt flights to the United States and governments warned of potentially devastating financial costs.
The abrupt halt will shake tourism-dependent industries on both sides of the Atlantic Ocean, from airlines to hotels to museums and amusement parks. It will disrupt ambitious business plans. It will add to the problems of world leaders already wrestling with the relentless coronavirus outbreak and the threat it poses to jobs and livelihoods. French Finance Minister Bruno Le Maire spoke of a “massive shock,” and European officials reacted angrily after Mr. Trump late Wednesday announced that he would suspend travel from Europe to the United States for 30 days starting Friday, with the exception of Britain. The State Department warned Americans that they should reconsider all international travel, the most severe caution it can offer short of “do not travel.”
It adds to the world’s growing isolation as governments around the world tighten and even close their borders to stop the outbreak. It will also hammer the confidence of the world’s spenders, who are watching the news of the pandemic and increasingly choosing to stay home and keep their wallets closed. “The coronavirus is a global crisis, not limited to any continent, and it requires cooperation rather than unilateral action,” the European Commission said. “The European Union disapproves of the fact that the U.S. decision to impose a travel ban was taken unilaterally and without consultation.”
Shares in European airlines were hammered Thursday after Mr. Trump late Wednesday announced that he would suspend travel from Europe to the United States for 30 days, with the exception of Britain. The State Department also warned Americans that they should reconsider all international travel, the most severe caution it can offer short of “do not travel.” The move hammered shares of European airline and travel stocks as the sector braced for a nearly unprecedented brake on activity. Air France, Lufthansa and IAG, the owner of British Airways and Iberia, fell as much as 13 percent. In early trading in the United States, American Airlines fell about 14 percent, and Delta Air Lines fell 12 about 12 percent.
Travel and leisure stocks slumped nearly 10 percent on the benchmark Stoxx 600 index, and European airline shares plunged as much as 20 percent as the sector braced for a nearly unprecedented brake on activity. Air France, Lufthansa and IAG, the owner of British Airways and Iberia, fell as much as 13 percent. Shares in Carnival, the cruise ship operator, fell to 11-year lows. “The impact will multiply very rapidly in the hours and days to come,” said Roland Héguy, president of the Umih, the French trade association of hotels and restaurants. “Many countries will be hit,” he said, adding that 95 percent of hotels, cafes and restaurants in France were already suffering revenue declines of up to 40 percent because of the coronavirus.
Questions swirled about the possibility of work furloughs or potential layoffs. In Rome, Ciampino Airport, a hub for low-cost airlines, announced Thursday it would shutter entirely as of Friday because of the outbreak. Rome’s Fiumicino Airport, which hosts international flights, is bracing for reduced activity, its operator said. Given how much economic damage has already been done in Europe from the epidemic, some economists said the travel ban, while shocking, would not meaningfully deepen the ongoing downturn — and might even help hasten a recovery.
The move worsened a stock market slump in Asia and sent airlines and other industries scurrying for answers. European visitors to the United States, excluding those from Britain, totaled nearly 11 million in 2018, accounting for more than a quarter of all travelers. “Considering all the other restrictions on movement already in place in Europe, in and of itself the ban is not a huge economic event,” said Holger Schmieding, chief economist at Berenberg Bank. “You could even argue that it is a blessing in disguise if it has the effect of slowing the spread in the United States,” he said.
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Travel and tourism between the United States and Europe, including areas not covered by the ban, is a business totaling roughly $130 billion annually, according to U.S. data. The blow will be felt in both regions, as airlines that cannot bring European travelers to the United States are unlikely to maintain a large number of flights going the other way. Because the epidemic is a medical emergency, he added, the most important thing governments can do to to ensure economic recovery is to prevent the virus from spreading more widely, even if it inflicts financial pain on companies.
“At the moment, significant short-term economic costs should be incurred if it helps with the medical emergency.” he said. “If it slows the spread of the epidemic to give us enough time to cope, that would be very valuable.”
Nonetheless, the abrupt travel ban threatened a further blow to tourism-dependent industries on both sides of the Atlantic Ocean, and added to the problems of world leaders trying to preserve jobs in the face of the relentless coronavirus outbreak.
European airlines were already grappling with a mounting financial toll after curtailing flights Europe and to Asia. Lufthansa said Wednesday that it would cancel 23,000 flights across the group, a 50 percent reduction.
The European Union, and countries including Italy, Germany and Britain, have pledged over 70 billion euros in aid this week alone to support health systems and prevent an economic domino effect as the coronavirus epidemic puts a chilling effect on businesses and the supply chain.
European officials are especially keen to avoid widespread layoffs at a time when Europe’s economic recovery has showed signs of faltering. They are aiming much of their financial firepower at supporting businesses with schemes to move workers to partial employment to minimize the risk of a spike in unemployment.
That didn’t stop questions from swirling Thursday about the possibility of layoffs. In Rome, Ciampino Airport, a hub for low-cost airlines, announced Thursday that it would shutter entirely as of Friday because of the outbreak. Rome’s Fiumicino Airport, which hosts international flights, is bracing for reduced activity, its operator said.
As passengers at Paris’s Charles de Gaulle airport rushed to book last-minute flights to the United States, Air France said it would decide later Thursday whether to maintain its service to the United States, which represent about a third of revenue. The French government said it was ready to provide state aid — normally forbidden under European Union rules — to help the carrier weather a potentially sharp financial hit.
At the airport, Nadia Hamnache, an employee at SafeBag, a company that sells protective wrap for luggage, said there were already far fewer travelers, with up to 50 percent fewer people visiting shops in Terminal 2E, the hub for Air France and Delta flights. “We’re really afraid of a reduction or canceling of Air France flights, because that impacts us directly,” she said. “If the cancellation of flights continues, we’ll have a loss of revenue.”
Employees were worried that they might be told to stay home, she added. “If we’re still paid, that’s OK, but if they don’t pay us that’s going to be a huge problem,” she said.
European visitors to the United States, excluding those from Britain, totaled nearly 11 million in 2018, accounting for more than a quarter of all travelers. Travel and tourism between the United States and Europe, including areas not covered by the ban, is a business totaling roughly $130 billion annually, according to U.S. data.
Airlines had already been cutting routes across the Atlantic as travelers increasingly chose to stay home. Still, the industry will take an immediate hit.Airlines had already been cutting routes across the Atlantic as travelers increasingly chose to stay home. Still, the industry will take an immediate hit.
Air France KLM’s revenue from North American business, which includes destinations outside the United States, totaled $4 billion last year, or about 13 percent of its sales. Lufthansa’s totaled $3.7 billion for the first nine months of last year, or about 15 percent of its sales.Air France KLM’s revenue from North American business, which includes destinations outside the United States, totaled $4 billion last year, or about 13 percent of its sales. Lufthansa’s totaled $3.7 billion for the first nine months of last year, or about 15 percent of its sales.
United Airlines and Delta Air Lines both reaped about $7.4 billion from flights over the Atlantic last year, which includes business beyond the countries affected by Mr. Trump’s order. For United, that totaled 17 percent of revenue. For Delta Air Lines, it represents about 15 percent.United Airlines and Delta Air Lines both reaped about $7.4 billion from flights over the Atlantic last year, which includes business beyond the countries affected by Mr. Trump’s order. For United, that totaled 17 percent of revenue. For Delta Air Lines, it represents about 15 percent.
United wasn’t immediately available for comment. Delta said it was in contact with the government and working to comply with the ban. Delta said in a statement that it would “quickly make adjustments to service, as needed, in response to government travel directives.” Travel agencies and tour operators also scrambled for solutions to withstand the impact.
The Association of Flight Attendants called the ban “irresponsible” and accused the Trump administration of announcing the ban for political reasons. “Without any consultation with the industry, we don’t even know what this means,” said Sara Nelson, president of the union. “It’s absolutely catastrophic,” said Jean-Pierre Mas, president of Entreprises du Voyage, a union representing the main French tour operators.
It is far from clear whether Mr. Trump’s order will help stop the outbreak in the United States. The virus is now being spread by Americans who have had no contact with regions that have high rates of infection. Italy was one of the first countries to cut off all travel from China and Hong Kong after the coronavirus first publicly emerged in the Chinese city of Wuhan in January. It is now the center of Europe’s outbreak. Mr. Mas said that the United States was the most popular non-European destination for French tourists and business people. Every year about 1.8 million French citizens visit the U.S., with a specific preference for March and April, when about 400,000 French fly to the U.S.
Still, the order adds to the barriers being erected around the world. India on Wednesday put a halt to all tourist visas. China since January has restricted the ability of its own people to travel, and it has added growing restrictions for visitors as well. Anti-immigrant groups in Europe have called for even tighter borders. Mr. Mas condemned the “irrational attitude of Trump who thinks that he is protecting his country by barricading it” and said that he was worried such a ban would prompt other countries to follow suit. “This attitude will go viral in the coming days, if not hours,” he said.
Such barriers undermine the confidence of the world’s consumers. In the United States, in Europe, in China and around the world, consumers have emerged as a major economic force, as more countries grow more prosperous and as widespread internet access encourages them to buy even more. Aéroports de Paris, the company that runs the two main international airports in Paris, said it was still planning its response to the ban and could not give specific details about its impact.
They have grown even more important since the United States launched a trade war with China, shaking global manufacturing. Consumers helped pick up the slack. “But it’s a catastrophe, for all travel and tourism sectors, for airline companies, for hotels,” said Sonia Gacic, a spokesperson.
Now that essential engine is sputtering. Constant Meheut and Eva Mbengue contributed reporting from Paris. Jack Ewing contributed reporting from Frankfurt. Ben Casselman contributed reporting from New York.
Consumer spending “has effectively held up the economy in what has been a manufacturing recession. Anything that jeopardizes that will be problematic,” said Shaun Roache, chief economist at S&P Global.
“Probably the biggest effect will be on confidence,” Mr. Roache said, referring to Mr. Trump’s ban. “The more you see these kinds of measures, the less you’ll have people willing to venture out of the house. That hits consumer spending.”
For the business world, the effects will go beyond consumer demand. The ban on travel will hurt cooperation on research and development for big companies that have laboratories around the world. It will throw a wrench into bankers’ ability to do audits for mergers and acquisitions.
“Just imagine as a businessman, you cannot visit the largest market in the world and the second-largest market in the world. How much worse can it get?” said Jörg Wuttke, president of the European Chamber of Commerce in China.
Teleconferencing and working from home are only short-term fixes, he said: “The world cannot operate online.”
Liz Alderman and Ben Casselman contributed reporting.