Airline Industry Faces Deep Impact as Coronavirus Staggers Travel

The economic impact of coronavirus outbreak is leading to sharp drops in air travel demand around the world. As the outbreak continues to spread, the global airlines face US$113 billion loss in sales, according to the International Air Transport Association (IATA). Earlier this week, United Airlines became the first U.S. carrier to announce a widespread cut to domestic services, with saying the fear over the virus starting to erode ticket sales.

The impact of the decrease in China has been even more severe as air travel has reduced by 80 percent at the country’s busiest airports and mass cancellations of both domestic and international flights. The outbreak has also led to sharp reductions in air travel demand in the US when several major companies like Amazon ordering a restriction on all non-essential employee travel.

The decreasing demand and losses in sales would be similar to those experienced by the aviation industry during the global financial crisis in 2008. As per the IATA, airlines could lose 19 percent of their business if the virus is not contained soon. Just a couple of weeks ago, IATA predicted lost sales in the range of US$30 billion. It also said that airlines in Europe and Asia would hit hard by the coronavirus outbreak, and carriers in the Asia Pacific could lose US$58 billion in sales.

Moreover, travel restrictions and a lack of demand from customers have led dozens of major airlines to cancel flights to and from mainland China due to this deadly virus infection. During an annual conference for airplane financiers and lessors, speakers delineated the tremendous hit already dealt to airlines in Asia. In the event, attendees also expressed rising concerns about the impact ahead in Europe and the U.S.

With this outbreak, carriers around the world are cutting routes, freezing pay and using smaller aircraft to cope with a further slump in bookings. Reportedly, British Airways and Ryanair announced flight cuts earlier this week, with British Airways dropping 432 flights between 16 March and 28 March, including one flight a day between London and New York in addition to services to Italy, France, Germany and elsewhere in Europe. On the other hand, Ryanair, Europe’s biggest short-haul carrier, also said to cut hundreds of services by curtailing a quarter of its flights to and from Italy between 17 March and 8 April.

The coronavirus outbreak also hurts airlines stocks as United Airlines (UAL) stock, for instance, is down 32 percent so far this year, and shares in Germany’s Lufthansa (DLAKF) are dropped 29 percent over the same period.

Lufthansa has canceled 7,100 European flights for March, mostly within Germany or on routes to Italy, which is accounting for around 25 percent of its total capacity. The airline company also said to ground 150 of its 770 aircraft.