Shares in Europe’s biggest airlines and travel groups, including British Airways owner IAG and KLM-Air France, faced heavy losses alongside a stock market wipeout in the U.S. Shares in IAG fell more than 5% in early morning trading in London, while Air France-KLM tumbled over 6%. 

IHG (InterContinental Hotels Group), which owns global hotel franchises including Crowne Plaza and Holiday Inn, fell more than 3% in early U.K. trading. 

Travel companies with less exposure to the U.S., for example continental carriers Ryanair and EasyJet, experienced more subdued losses. 

Trump confirmed investors’ worst fears in a Sunday interview with Fox News, when he admitted the U.S. could slip into recession as a result of his aggressive trade wars. 

Trump said the U.S. was in a “period of transition, because what we’re doing is very big”, putting an end to hopes that his tariff threats lacked credibility. Shares in the S&P 500 plunged 2.7% on Monday as traders digested Trump’s comments.

The U.S.’s decline inevitably stoked contagion fears across the globe around how lower U.S. consumer spending could hit international markets. In Europe, that has been felt most immediately in the travel sector, which has grown accustomed to U.S. travelers’ deep pockets.

‘When the US sneezes, the rest of the world catches a cold’

European travel companies declined after Delta posted reduced revenue targets on the back of poor domestic demand for U.S. passengers, which cast doubt on Americans’ international spending power. That added to the pain caused by Trump’s comments on Sunday.

Americans have indeed proved to be a goldmine for Europe’s international travel operators. The trend of “revenge travel” helped pump billions of dollars of tourism money into the continent’s travel sector in the wake of COVID-19. A strengthening dollar against the pound and the euro in recent years has made travel across the Atlantic all the more enticing.

These travel trends were most in focus during the Summer of 2024, when Taylor Swift fans, often from the U.S., flocked across Europe to watch her Eras Tour, while an estimated 230,000 Americans flew to Paris for the Summer Olympics, according to the city’s tourism office.

The lucrative nature of these visits wasn’t missed by the decision-makers at Europe’s biggest travel companies.

Speaking to the Financial Times last week, Air France-KLM CEO Ben Smith said the airline was pivoting its business model to focus on the premium end of the travel market, in part because of the “amazing demand” it had witnessed from U.S. travelers.

“It’s unbelievable what Americans are paying to come over here, if you look at what it costs to stay down the street at the Bristol Hotel,” Smith said. 

A representative for Air France-KLM didn’t immediately respond to a request for comment.

The decision to focus more on the U.S. has been a logical decision based on years of outsized demand from its citizens.

However, there is now a real risk that Trump’s economic conquest over the U.S.’s traditional allies could start to impact Americans’ spending and even affect their propensity for expensive trips to Europe. 

“The risk to Europe is twofold, usually when the US sneezes, the rest of the world catches a cold,” wrote Kathleen Brooks, research director at XTB. 

“If U.S. airlines are seeing a decline in demand, then the same could happen on the other side of the Atlantic. Also, post Covid, the U.S. consumer has traveled the world and has become an important component of the global travel and leisure sector. If they start to pull back, then this will not only impact U.S. carriers, but European ones too.” 

Michael Field, chief equity strategist at Morningstar, sounded a more optimistic tone on Europe’s travel stocks.

“The share price reaction by European travel stocks this morning has been mixed and we would caution a limited read-across to European travel stocks. European airlines haven’t seen the same run up as US ones over the last year or two, with the European economy having been weaker.

“We believe the macroeconomic situation in Europe is improving, which is likely to lead to increased spending in the region. We see a lot of attractive stocks in the European space, particularly amongst the airlines.”