The Trump administration issued an order suspending passenger flights from China-based airlines, saying it was retaliation for Beijing barring American carriers from re-entering that market, in a continued escalation of tensions between the two nations.
The order issued Wednesday goes into effect June 16 but President Donald Trump can act sooner if he chooses, the Department of Transportation said in a statement.
U.S. airline stocks rose amid a broad market rally and signs that travel demand is starting to rebound. A Standard & Poor's index of major carriers jumped 7% at 11:20 a.m. in New York to the highest intraday levels since March 31. Alaska Air Group Inc. led the rally with a 9.7% surge to $39.72, followed by United Airlines Holdings Inc.'s 8.9% advance to $32.58.
The move ramps up tensions between the U.S. and China, adding to disputes over trade, the coronavirus pandemic and the treatment of Hong Kong. On Friday, Trump said that the U.S. would "begin the process" of eliminating the policy exemptions that allow America to treat Hong Kong differently than the mainland. China's leaders recently moved to impose sweeping new national security legislation on the Asian financial hub.
Beijing has prevented U.S. carriers from restarting service there while four of its airlines have maintained flights to and from markets here this year as Covid-19 erupted, according to the Transportation Department statement. U.S. airlines had asked to resume service as early as June 1.
"The Chinese government's failure to approve their requests is a violation of our Air Transport Agreement," the DOT said in an emailed statement.
The order stops short of an outright ban, allowing Chinese carriers to operate one flight to the U.S. for each flight that nation grants to American carriers.
The order is aimed at Air China Ltd., China Eastern Airlines Corp., China Southern Airlines Co. and Xiamen Airlines Co. The news came after the close of trading in Shanghai and Hong Kong, which are major trading centers for publicly held Chinese airlines.
It isn't clear how the DOT order could impact the burgeoning air cargo operations between the U.S. and China.
Several U.S. passenger airlines have begun flying cargo in empty passenger planes as they struggle for revenue during the unprecedented downturn caused by the virus.