Airline, Hotel Stocks Fall On Fear About New Virus In China
Other stocks in the travel sector also took a hit Tuesday, including hotel chains like Marriott, which fell 4 percent , and Hilton, which was down 3 percent. Royal Caribbean Cruises slid 4 percent.Fear about the virus increased just as millions of Chinese prepared to travel for the lunar New Year holiday, which starts Saturday. Cases have also been confirmed in Japan, South Korea and Thailand.
- Jan 23, 2020
Courtesy/ News source: cnbctv18.com
Airline and hotel shares fell Tuesday as fear grew about a virus that authorities say has killed six people and sickened 300 more, including at least one person in the US
The outbreak of the new type of coronavirus is believed to have started in Wuhan in central China. No US airlines fly to Wuhan, but their Chinese partner airlines do, and some passengers transfer from Chinese carriers to American ones.
Tori Emerson Barnes, executive vice president of public affairs at the US Travel Association, a trade group, said travelers should follow any guidance offered by the US Centers for Disease Control and Prevention. So far, she said, that advice is very specific to travelers coming to and from Wuhan.
Investors worried that the virus could spread beyond Asia, like the SARS outbreak in 2002, which killed more than 700 people and hurt travel between the US and Asia.
Shares of Hawaiian Airlines' parent fell 5.5 percent Tuesday. United Airlines shares dropped 4.4 percent , American Airlines lost 4.2 percent , and Delta Air Lines declined 2.7 percent .
Other stocks in the travel sector also took a hit Tuesday, including hotel chains like Marriott, which fell 4 percent , and Hilton, which was down 3 percent. Royal Caribbean Cruises slid 4 percent .
“We’re obviously watching it carefully, it’s still way too early to talk about," Marriott CEO Arne Sorenson told CNBC Tuesday. “I think the Chinese authorities have got to make sure they understand what’s going on and we’ll have to watch and see what we learn from it.”
Royal Caribbean said in a statement, “In China, guests and crew are receiving enhanced health screening before boarding. The health and safety of our guests and crew is our top priority. We are monitoring the situation closely together with health authorities, and our ships are prepared to take additional preventive measures as circumstances indicate.”
The United States reported its first case Tuesday, a Washington state resident who returned last week from China and was hospitalized in good condition.
Fear about the virus increased just as millions of Chinese prepared to travel for the lunar New Year holiday, which starts Saturday. Cases have also been confirmed in Japan, South Korea and Thailand.
Last week, US health officials began screening passengers from Wuhan at New York's Kennedy airport, Los Angeles International and the San Francisco airport. Officials say they will expand the screening to Chicago's O'Hare and the Atlanta's airport, and require all US-bound travelers who begin their trips in Wuhan to go to one of those five airports.
Doug Yakel, a spokesman for San Francisco International Airport, said passengers coming in from Wuhan are filling out a questionnaire that is turned in to on-site officials from the US Centers for Disease Control. Those passengers are diverted to a separate area, where they are interviewed and evaluated by the CDC.
“There is a legitimate threat to travel,” said Henry Harteveldt, a travel industry analyst in San Francisco. “It’s small now, but with the potential to become much larger with just some innocuous event such as an undetected passenger getting through (health) screening at an arrival airport like San Francisco International, Kennedy or LAX.”
Harteveldt said the situation also could become worse for airlines if companies start to restrict travel to China.
But some analysts cautioned that it was too early to predict the impact.
“Delta being down 5% seems to be an overreaction,” said Joseph DeNardi, an airline analyst for Stifel Nicolaus. “I don’t think Delta’s business is worth 5 percent less knowing what we know now.”
J.P. Morgan analyst Jamie Baker said 25 percent of Hawaiian's revenue is tied to Asia, followed by 12 percent at United, 6 percent at Delta and 4% at American.
In 2002 and 2003, while US airlines were still reeling from the 9/11 terror attacks, the SARS outbreak hurt their international business. Harteveldt recalled a trip he made back then to Tokyo.
“Health workers in hazmat suits came on board and took people’s temperatures before they could disembark,” he said. “It was quite frightening."
Chinese authorities confirmed that the coronavirus can spread from one person to another, not just from animals to humans. So far, however, the virus appears to be less dangerous and infectious than SARS, which also began in China.
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