Airline Stocks Lose $4.9 Billion as Investors Weigh Travel Ban

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  • S&P 500 airline index loses 3.8% this week, more than market
  • Prospect of retaliation, compliance expenses weigh on shares

In two days, President Donald Trump’s travel ban wiped out $4.9 billion in market value for the country’s biggest airlines.

The Standard & Poor’s 500 airline index slumped 3.8 percent combined on Monday and Tuesday, five times the 0.7 percent drop in the S&P 500. American Airlines Group Inc., the world’s biggest carrier, led the industry group with a 5.8 percent decline over the two days.

The developments hold several concerns for investors. One is that the U.S. restrictions would expand or spark retaliation by other nations; another, outlined by the International Air Transport Association, is the prospect of higher costs for carriers to enforce the rules, and potential ramifications if they don’t. While it’s hard to quantify, there’s also a risk that some people will forgo travel to the U.S.

“To the extent that America is becoming a less welcoming place, a less hospitable place, that could hurt leisure travel demand,” said Jim Corridore, an airline analyst at CFRA Research. In a similar vein, Cowen & Co. analyst Helane Becker wrote in a note that any financial hit to U.S. airlines probably will come through their international alliance partners, who provide passengers to the U.S. carriers for connecting flights.

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