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US ban on Schengen flights will hit BA owner IAG and present "unprecedented challenges" for Europe's airlines, says Liberum

The broker said IAG would be impacted not only through its Spanish airline Iberia but also via “significant connecting traffic flows” from the banned countries

International Consolidated Airlines Group - US ban on Schengen flights will hit BA owner IAG and present "unprecedented challenges" for Europe's airlines, says Liberum

The US ban on travellers from the EU’s Schengen area will hit International Consolidated Airlines Group SA (LON:IAG) alongside a number of other European carriers according to analysts at Liberum.

On Wednesday night, President Trump announced that travellers from the Schengen area, which includes 26 EU member states such as Italy, France, Spain and Germany, will be barred from entering the US from Friday for a month in an attempt to contain the spread of the coronavirus.

READ: Airlines suspend Italian flights as country put on coronavirus lockdown

Liberum said that IAG would be impacted not only through its Spanish airline Iberia but also via “significant connecting traffic flows” from the banned countries through both Iberia and British Airways.

“While the UK and Ireland are not included in the ban, reducing the impact on British Airways and Aer Lingus, both airlines have significant exposure to transfer traffic to/from the banned countries and Iberia's home market of Spain is included in the ban”, Liberum said.

“We see this as presenting unprecedented challenges to the European airline industry”, analysts said, adding that other carriers such as Lufthansa and Air France-KLM will be “cut off from their most profitable routes for the next month”.

They also expected the ban to cause spillover effects on routes that are still operating, suggesting that continental carriers such as Ryanair Holdings plc (LON:RYA) and easyJet PLC (LON:EZJ) will also see weaker demand over the period.

Analysts at fellow broker Peel Hunt added that while IAG had a “robust” balance sheet, the ban presented “a particularly challenging environment” that could see its peers requiring emergency funding.

IAG shares were 8.1% lower at 364.6p in late-morning trading on Thursday.

Quick facts: International Consolidated Airlines Group

Price: 226.5 GBX

LSE:IAG
Market: LSE
Market Cap: £4.5 billion
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