Coronavirus hits airline industry revenues hard as customer panic, flight suspensions deliver the gut-punch
The Coronavirus (COVID-19) outbreak is unleashing chaos in markets and industries around the world and one of the industries suffering the most is the airline industry. With strict travel restrictions being implemented by different countries, the airline industry is set to suffer huge losses in revenues.
Last week, the International Air Transport Association (IATA) released a report that estimated the airline industry could lose $113 billion, however, that scenario included markets that have 10 or more confirmed cases of COVID-19 as of March 2.
However, as of March 10, over 45 additional countries have reported cases of coronavirus infection according to a report by the World Health Organization (WHO). IATA is likely to release an updated analysis in the following days.
Meanwhile, in a statement on March 10, the Airports Council International (ACI) has estimated a loss of global airport revenues of at least $4.3 billion for total revenue. ACI estimates that most of the loss in revenues is expected to occur in the Asia-Pacific region with a difference of $3 billion in projected revenue. In a statement, ACI World Director General Angela Gittens said, "The airport industry recognizes that all stakeholders of the aviation ecosystem are heavily impacted by the COVID-19 outbreak, and as such, favors a strengthened cooperation between airports, airlines, and regulatory authorities as the industry responds to the outbreak."
Amidst all this, airlines are asking staff to go on paid or unpaid leave in order to deal with the crisis. A spokesperson for Emirates Airlines tells MEA WorldWide (MEAWW): "The knock-on effect of these operational changes has resulted in more resources than required in certain areas of the business for our day to day requirements."
Meanwhile, the International Civil Aviation Organization (ICAO, a specialized United Nations (UN) agency, has announced the adoption of a special declaration on COVID-19. The ICAO has supported calls by WHO for countries to perform their own risk assessments and adapt their response measures accordingly, taking into account the International Health Regulations.
While IATA has requested a global suspension of slot rules due to the outbreak, ACI is urging for a "proportionate slot allocation response to COVID-19 that will preserve global airport connectivity," arguing that "a global suspension of slot rules would jeopardize the ability for countries to stay connected with the world which will, in turn, have knock-on effects to economies."
At present, the rules for slot allocation mean that airlines must operate at least 80% of their allocated slots under normal circumstances. Failure to comply with this means the airline loses its right to the slot the next equivalent season
As the number of COVID-19 infections continues to increase globally, discussions are going on about bailing out industries affected by the outbreak. According to separate reports by the Washington Post and CNN, the Trump administration is reportedly considering deferring taxes on the airline, cruise and hospitality industries as a way to limit economic damage from the outbreak of the virus.
After 9/11, a $15 billion financial aid package was announced for the airline industry, however, during the 2008 financial crisis, the airline industry was in a stronger position and therefore was not given a bailout package by the government.
Understandably, the airline industry is in a better position now and according to the New York Times, a Democratic official on Capitol Hill said that party leaders did not like the idea of bailing out individual industries, like airlines, with targeted tax cuts. Under the current state of affairs, it seems unlikely that the House of Representatives will pass measures for aiding the airline industry.
The airlines are also trying to tackle the panic surrounding the outbreak. A coalition of more than 150 travel-related organizations, including Airlines For America, American Society of Travel Advisors, and others issued a statement on Tuesday encouraging travelers to look at information from public health officials instead of giving in to the fear surrounding the coronavirus.
The airline industry is certainly panicking. Airlines For America released a statement on Tuesday, March 10, blaming "false media narratives that have led to confusion and uncertainty across the country."
Reports had emerged that airlines were operating many "ghost" flights and wasting thousands of gallons of fuel because of European rules saying operators can lose their flight slots if they keep their planes on the ground. However, American and Delta Airlines are cutting domestic and international flights and more airlines are set to follow suit.
While researchers are working on developing a vaccine for the COVID-19 virus, mass production would be unlikely before the end of the year - first, it will have to be tested on animals, and if that goes well, human trials will follow.
As such, it is clear that this is only the beginning of the crisis and we will have to wait for a few more months until a clearer picture emerges as to how travel patterns across the world might be affected.