Impact of coronavirus on airline industry to be worse than 9/11

The impact of coronavirus on airlines is expected to be greater than the 9/11 terrorist attacks in 2001 or the 2003 SARS epidemic | WATCH

The impact of the coronavirus on air travel is expected to be greater than the 9/11 terrorist attacks in 2001 or the 2003 SARS epidemic, as more airlines slash flights in response to shrinking demand.

Since the China government banned outbound group travel on January 24, more than 200,000 flights have been cancelled or removed from schedules to, from and within the country.

As demonstrated in recent announcements by Singapore Airlines, Cathay Pacific, Qantas and Virgin Australia, the flight cancellations have spread to much of Asia, New Zealand and parts of Europe and also hit domestic networks. Services to Japan, South Korea, Vietnam, Thailand, Singapore and Malaysia have been reduced, with further cuts expected as a result of fresh outbreaks to Italy and Iran.

At Cathay Pacific alone, 25,000 employees have agreed to take unplanned leave as the airline grapples with the fallout from Covid-19. Qantas has revealed the impact of capacity cuts is equivalent to 18 aircraft being grounded, and 700 full-time roles are currently considered “surplus” to needs and managed through paid leave.

1 2 3 4 5

Although government-issued travel restrictions designed to help contain the deadly virus have played a major role in the flight cancellations, anxiety about air travel and the sudden cessation of the Chinese visitor boom are adding to the woes facing airlines.

China tourism consultant Andy Jiang, a former Tourism Australia destination manager, said it was unlikely at this point that easing travel bans would make much difference.

“I think with coronavirus being somewhat contained within mainland China and accelerated outbreaks outside of China, there will be a sentiment shift among Chinese that it might be safer to stay in China than to travel elsewhere,” Mr Jiang said. “By then, removing the travel ban probably would provide a smaller recovery than what we would initially expect.” Mr Jiang released analysis predicting dwindling numbers of Chinese visitors to Australia through to June. The data showed just over 12,000 arrivals from China in February, compared with 144,228 in the same month last year, in a total cost to the national visitor economy of $838m.

In March, 10,459 Chinese visitors are expected, down from 125,644 last year, and by June Mr Jiang expected that figure to shrink to 6785. Mr Jiang said his assessment did not include the considerable impact on the international education sector.

Since January 24, Qantas shares have nosedived 15 per cent from $6.71 to Wednesday’s close of $5.72. Virgin Australia shares have also been stung, slipping to a ­record low of 12c, from 14.5c.

Travel company Webjet fared even worse with shares sinking 22 per cent in just over a month, from $14.30 on January 24, to $11.06 on Wednesday. In Europe, EasyJet shares suffered their biggest drop since Britain voted to leave the EU in June 2016, plummeting 16.9 per cent. Shares in Ryan­air slid 13.5 per cent and Air France and Deutsche Lufthansa both saw shares lose more than 8 per cent of their value.

“The coronavirus numbers increasing so much in Italy and in the Middle East has given concerns that maybe this will take much more time to contain than first expected,” said Henrik Drusebjerg, chief strategist at Danske Bank Wealth Management. “Investors now fear that this is not just a first-quarter thing ... and the overall growth impact will be much more severe than first thought.”

With Wall Street Journal