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.
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.