Shares of U.S. airlines tumbled the most in three months on Monday 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 has already 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.
Fort Worth-based American Airlines Group (ticker: AAL) tumbled the most among major U.S. carriers, dropping $2.05, or more than 4 percent, to $44.90. Delta (ticker: DAL) lost $2.03 to close at $47.67. Carriers focused on domestic markets declined less.
Trump’s order, which he signed on Friday, sparked a weekend of 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 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.
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 and Etihad Airways. All three Gulf carriers operate flights into DFW Airport.
The Partnership for Open & Fair Skies, representing American, Delta and United, said last week it was looking forward to working with Trump to enforce Open Skies agreements.
A computer failure that forced Delta Air Lines 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.”