Commentary

As Coronavirus Scares Travelers, Airlines Face Mounting Losses

With businesses and organizations canceling meetings and vacationers balking at venturing abroad as the global coronavirus crisis escalates, airlines are canceling flights. The International Air Transport Association (IATA) yesterday warned that between $63 billion and $113 billion in airline revenues could be lost this year.

“Airline stocks dropped sharply on Thursday as investors reckoned with the prospect of canceled flights, lost sales and substantial reductions in service for months to come. Several carriers -- including United Airlines, JetBlue and Lufthansa -- announced new route closings in recent days,”   David Gelles and Niraj Chokshi report  for The New York Times.

“It has been almost 20 years since the aviation industry faced such an existential threat. After the terrorist attacks of Sept. 11, 2001, global air travel plummeted, and it took years for airlines to fully recover. Today there are worries that the coronavirus could have a similarly disastrous impact,” they continue.

advertisement

advertisement

“‘There are dramatically fewer people flying this week than there were last week,’ said Airlines for America CEO Nicholas E. Calio. “Flights are being taken down because people aren’t getting on airplanes.”

“Just two weeks ago, IATA had been expecting lost sales in the range of $30 billion,” Charles Riley points out  for CNN Business.

“The turn of events as a result of [the coronavirus] is almost without precedent. In little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse,” Alexandre de Juniac, the CEO of the industry group, said in a statement. “It is unclear how the virus will develop, but … this is a crisis.”

“Airlines in Europe and Asia would bear the brunt of the pain, according to IATA. Carriers in Asia Pacific could lose out on sales worth $58 billion,” Riley adds.

Back in the U.S., “Southwest said on Thursday that it expected to lose between $200 million and $300 million in ticket sales, thanks to the outbreak. ‘In recent days, the company has experienced a significant decline in customer demand, as well as an increase in trip cancellations,' it explained in a regulatory filing,” Jordan Weissman writes for Slate.

“‘We're 97% domestic, so what we're seeing is a drop-off in DOMESTIC travel,’ says Southwest Airlines CEO Gary Kelly on @CNBC just now. ‘It has a 9/11-like feel,’” CNBC’s Carl Quintanilla tweeted.

Meanwhile, Exeter, U.K.-based Flybe, Europe’s largest independent regional airline, went out of business early yesterday morning. CEO Mark Anderson said the outbreak of coronavirus compounded its inability to raise funds. The airline was bought a year ago by a consortium headed by Virgin Atlantic, Simon Calder reports  for the Independent

“Flybe’s collapse ‘will likely be the first of many in 2020,’ said James Goodall, transport analyst at Redburn,” the BBC’s Justin Harper writes

“We expect that the demand destruction caused by Covid-19 accelerated its demise and we believe further airline bankruptcies should be expected in the coming months,” Goodall said.

Shortly after several airline CEOs met at the White House with president Donald Trump and vice president Mike Pence on Wednesday, United announced that it would reduce passenger-carrying capacity 20% on international routes and 10% in the U.S. starting in April, the Associated Press reports  for MarketWatch.

“The virus ‘is affecting the airline business, as it would,’ Trump said after the meeting. ‘A lot of people are staying in our country, and they’re shopping and using our hotels in this country. So from that standpoint, I think probably there is a positive impact…,’” the AP story continues. 

On MarketWatch, Tomi Kilgore suggests  that “the selloff in airline stocks resulting from the coronavirus outbreak could be costing Warren Buffett nearly $3 billion over the past few weeks” but writes that “Buffett is in it for the long haul” and posits that the impact may be lessened by the quick responses.

“Some Wall Street analysts suggested negative effects of COVID-19 on airlines could be short lived, as sooner-than-expected cuts in seat supply, like those announced by United, could help soften the effects of reduced demand,” Kilgore continues.

On a Fox News town hall broadcast from Scranton, Pennsylvania, last night, Trump reiterated his silver-lining reading of the dashed overseas travel plans of businesspeople and vacationers. 

“I must say, people are now staying in the United States, spending their money in the U.S. and I like that. I have been after that for a long time,” he told the audience, Newsweek’s Christina Zhao writes. “I've been saying, ‘let's stay in the U.S., spend your money here,’ and they’re doing that. They're sort of enforced doing that.”

Next story loading loading..