EU’s Move to Keep Americans Out Signals Long Travel Slump
(Bloomberg) -- As the Eiffel Tower gradually reopens from an extended shutdown, an essential segment of the summer tourist trade will be missing: Americans touching down in Paris on lucrative trans-Atlantic flights.
Voyagers from New York, Houston or Los Angeles will have to hold off on their overseas vacations after European Union governments extended a travel ban from Wednesday, deeming the U.S. response to Covid-19 insufficient to allow its citizens to enter the bloc for non-essential reasons.
The decree, which will be reassessed every two weeks, signals the restrictions holding down business and leisure travel across the Atlantic will remain in place until the spread of the deadly virus is curtailed in the U.S.
In contrast, the EU loosened rules for residents of countries including Australia, Canada, Japan and New Zealand, partly easing the paralysis that seized up travel when the pandemic first took hold. But the ruling on the U.S. highlights the challenges facing airlines and hotels as they try to plan for a rebound.
“Now we know that this will be a prolonged crisis without any return to normal for a very long time,” Alain Battisti, president of France’s aviation group Federation National de l’Aviation Marchande, said in an interview. “The European decision certainly won’t translate into a strong turnaround. Instead, it’ll be timid and very gradual.”
France was the world’s most-visited international tourist destination in 2018, one of four current European Union countries among the top 10, based on data from the United Nations World Tourism Organization. The U.S. was third, helping to explain why routes over the North Atlantic are the most profitable segment of the airline industry.
That trade was hit hard after governments across the globe imposed lockdowns on public life and limited travel in an effort to tame the health crisis. Yet as the spread of the virus slows in Europe, including in former outbreak hotspots like Italy, France and Spain, cases continue to climb in parts of the U.S.
“We were obviously disappointed in the EU’s decision not to include the United States,” said Nicholas Calio, chief executive of Airlines for America, the trade group for U.S. carriers. “I’d refer to it as a work in progress and we’re hopeful that decision will be reviewed soon, and at least on a limited basis international travel between the U.S. and EU will resume.”
Meanwhile, as the Eiffel Tower reopens its elevators to tourists on Wednesday, demand from Europeans to travel to the U.S. has completely dried up, according to Battisti. He cites health fears as well as a wave of recent protests over police violence.
While the European decision could lead to a boost on some long-haul routes to other countries, demand is expected to remain largely within the region, and mostly around the Mediterranean this summer, he said. The French regional carrier Chalair Aviation, which Battisti heads, has seen rising sales to destinations like Corsica.
Business travel is also being hurt. Almost 40% more business- and first-class seats were sold on North Atlantic flights than the nearest contender last year, according to figures from OAG Aviation Worldwide.
“It’s a nightmare from an airline point of view,” said John Strickland, director of JLS Consulting in London, who has held senior positions at BA and KLM. “It’s a mammoth task for airlines to plan their routes based on what they think demand will be.”
Even with demand at normal levels, summer revenues are what decide whether or not a carrier survives through the winter, Strickland said. For airlines with large cash reserves, a bad summer will mean they have to cut jobs and retire planes, while for weaker carriers “it’ll push them over the edge.”
The EU judgment, which is non-binding on member states, recommends that visitors only be allowed into the bloc from countries where the average number of infections per 100,000 inhabitants over the past two weeks is similar to or below the level of the EU, and that the trend of new cases is declining.
While border controls are a national competence of individual governments, the document commits member states to coordinate their approach and not lift the ban for countries outside the list.
A harmonized border policy is crucial for the EU since once a traveler enters the so-called Schengen area, they can theoretically move between member countries without passport checks. And if nations start to think that their neighbors aren’t adhering to the EU guidelines, then they could reimpose internal borders, effectively bringing the free movement of people to a standstill.
Still, there are loopholes: Denmark and Ireland have opted out of the common border policy, meaning they aren’t bound by the decision. Hungary will exempt U.S. film crews from the ban so they can continue shooting in the eastern European country. The U.K., which left the EU earlier this year, is expected to announced a relaxation of its quarantine policies for travelers entering from a list of partner countries as soon as Wednesday.
Moreover, U.S. citizens with residence permits in EU countries, as well as students, medical professionals and diplomats, are still allowed in. Europeans already in the U.S. can return home at any time, and vice versa.
In a bid to navigate the complicated regulatory environment, airlines have put the onus on customers to ensure they have proper travel documents and are eligible to enter their destinations. Uncertainty about the changing nature of the rules is likely to dissuade people from booking holidays, according to Battisti.
“There is huge confusion in the minds of travelers and that’s not helping,” he said, pointing to slight variations even on travel to France’s overseas islands and territories. “We could be entering a long period of subdued demand for air travel of any kind.”
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