At the time of writing the Flight Centre share price is down 16% and the Webjet share price is down 15%.
Why are they sinking lower?
Investors were selling the travel agent company’s shares this morning amid concerns the United States was about to ban travel to and from Europe.
This speculation has proven to be accurate, with President Trump announcing a travel ban at noon today.
According to the BBC, the United States has made sweeping new travel restrictions on Europe in an effort to fight the spread of the coronavirus.
President Trump has suspended all travel to Europe, excluding the United Kingdom, for the next 30 days.
He explained: “To keep new cases from entering our shores, we will be suspending all travel from Europe to the United States for the next 30 days. The new rules will go into effect Friday at midnight.”
This is another blow for travel agents such as Flight Centre and Webjet, which have experienced a significant drop in bookings since the coronavirus broke out.
Earlier this week Webjet withdrew is earnings guidance for FY 2020. As recently as a few weeks ago it was expecting underlying EBITDA of between $147 million and $165 million, an increase of 14% to 28% over FY 2019.
However, due to a material escalation in the cancellation rates of near-term travel and a reduction in overall travel booking activity, management advised that there was insufficient insight into its future performance to maintain its earnings guidance.
This was also the case for fellow travel agent Helloworld Travel Ltd (ASX: HLO), which blamed similar reasons for its earnings guidance withdrawal. Its shares are down 13% in early afternoon trade.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited and Helloworld Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.