Shares of Air Canada and three U.S. airlines that fly to China fell on Tuesday as fear grew about a virus that authorities say has killed six people and sickened 300 more.
Investors worried that the virus could spread beyond Asia, like the SARS outbreak that started in 2002, which hurt travel between the United States and Asia.
The U.S. reported its first case, a Washington State resident who returned last week from China and was hospitalized in good condition.
Air Canada, which said it is monitoring the situation closely, closed down 4.5 per cent and had fallen as much as 6.6 per cent, the most in 15 months.
United Airlines Holdings Inc. dropped 4.3 per cent, American Airlines Group Inc. lost 4.2 per cent, and Delta Air Lines Inc. declined 2.7 per cent.
Other stocks in the travel sector also took a hit Tuesday, including hotel chains such as Marriott International Inc., which fell 3.9 per cent. Hilton Worldwide Holdings Inc. was down 2.9 per cent and Wyndham Destinations Inc. slipped 1.7 per cent. Meanwhile, Royal Caribbean Cruises Ltd. slid 4 per cent.
“There is a legitimate threat to travel,” said Henry Harteveldt, a travel industry analyst in San Francisco. “It’s small now, but with the potential to become much larger with just some innocuous event such as an undetected passenger getting through [health] screening at an arrival airport like San Francisco International, Kennedy or LAX.”
Mr. Harteveldt said the situation also could become worse for airlines if companies start to restrict travel to China.
The outbreak is believed to have started in Wuhan in central China. None of the U.S. airlines fly to Wuhan, but their Chinese partner airlines do, and some passengers do transfer from a Chinese carrier to an American one.
Hotel and casino operators Las Vegas Sands Corp. and Wynn Resorts Ltd., both of which have large operations in China, fell 5.4 per cent and 6.1 per cent, respectively.
“It’s one of many factors that investors are considering. But I think focus is going to be on earnings season that’s in front of us,” said Gordon Charlop, a managing director at Rosenblatt Securities in New York.
“We’re watching the Davos, impeachment hearings, but at the moment, there’s nothing terribly remarkable about any of those events.”
China-exposed luxury goods makers including LVMH, Kering, Hermes and Burberry also fell.
On Tuesday, Chinese drug makers Jiangsu Bioperfectus Technologies Co. Ltd., Shandong Lukang Pharmaceutical Co. Ltd., and Jiangsu Hengrui Medicine Co. Ltd. were among those outperforming the wider market. Facemask manufacturers Tianjin Teda Co. Ltd. and Shanghai Dragon Corp. also outperformed.
Associated Press, Reuters, The Globe and Mail