U.S. Airlines Tumble Amid Fear Trump Travel Ban Will Spread

  • Investors also concerned about retaliation by other countries
  • American posts biggest drop, declining most in seven months

Trump Defends Travel Ban, Focuses on Regulations

U.S. airlines tumbled the most in three months as concerns mounted that President Donald Trump’s ban on travel from seven predominantly Muslim nations will lead to more restrictions on flights.

Investors are fearful that the U.S. curbs will expand or be answered with retaliation by other nations, said Joe DeNardi, an analyst at Stifel Financial Corp. Trump already has signed an order to pull the U.S. out of the Trans-Pacific Partnership trade accord and said he wants to restructure a 23-year-old pact between the U.S., Mexico and Canada. 

“With the U.S. participation in the North American Free Trade Agreement now unclear, we would not be surprised if the U.S. Open Skies agreement is also revisited,” Ronald Epstein, a Bank of America Merrill Lynch analyst, said in a report Monday. The effect of the order “is limited” from an aviation investor’s perspective, he said. 

The Bloomberg U.S. Airlines Index fell as much as 4.3 percent, the largest intraday drop in three months. U.S. stocks also declined amid global concern that Trump may follow through on his statements in favor of more isolationist policies.

Trump’s Jan. 27 order sparked a weekend of chaos and confusion at airports around the world, fueled by uncertainty over which passengers were barred. While none of the three biggest U.S. carriers flies to any of the seven countries, their global alliance partners do. The ban covers people from Iraq, Iran, Syria, Yemen, Sudan, Somalia and Libya. Three U.S. courts have temporarily blocked parts of Trump’s plan.

“Should you see it spread or more stringent restrictions on travel into the U.S. be enforced, that’s the concern,” DeNardi said in an interview.

Gulf Dispute

The three biggest U.S. airlines urged the Obama administration for more than a year to hold formal talks with the United Arab Emirates and Qatar over billions of dollars in alleged unfair subsidies provided to Emirates, Qatar Airways Ltd. and Etihad Airways PJSC. The Partnership for Open & Fair Skies, representing American, Delta and United airlines, said last week it was looking forward to working with Trump to enforce Open Skies agreements that govern flights between nations.

A computer failure that forced Delta Air Lines Inc. to cancel some flights Sunday and Monday also fueled concerns about airline risks, said Jim Corridore of CFRA Research.

“The travel ban is not likely to impact demand much, as not many people travel to/from the affected countries,” he said in a report. “However, these issues together raise risks related to airlines.”

Shares Tumble

American Airlines Group Inc. tumbled the most among major U.S. carriers, dropping as much as 6.6 percent for the biggest intraday decline in seven months. Delta slid 3.9 percent to $47.72 at 3:11 p.m. in New York. Carriers focused on domestic markets declined less.

“These things are overblown generally, but in the moment people freak out,” said Paul Lambert, an analyst at Tocqueville Asset Management, which holds about 583,000 Delta shares. “This kind of uncertainty over who’s getting visas is a valid question, but it’s more bark than bite.”

Trump on Monday attempted to deflect blame for chaos following his order with a series of Twitter posts, saying problems at airports were caused by the Delta outage and protesters. The carrier’s interruption didn’t occur until two full days after he issued the order. Delta didn’t respond to requests to comment on Trump’s tweet.

In-service aircraft and aircraft orders from the airline operators based in the countries named in the travel ban only account for about 1 percent of the global fleet, Epstein said. The aggregate orders include 131 planes purchased from Airbus Group SE, 28 with Boeing Co. and 11 from Bombardier, he said.

That total excludes the sale that Boeing announced late last year for 80 aircraft to be delivered to Iran Air over a decade, the U.S. planemaker’s first deal since the Islamic revolution of the late 1970s. That transaction hasn’t yet closed and isn’t included on Boeing’s online order database.

“We’re continuing to assess what impact the executive order might have and are closely monitoring congressional, administration and judicial actions,” said John Dern, a Boeing spokesman, by phone

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