Travel industry under siege as contagion spreads

Updated March 14, 2020

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BOSTON: The departures area is nearly empty in the international terminal of Logan Airport on Friday. The Trump administration has banned all non-US citizens from flying from continental Europe to the US in an effort to slow the ongoing spread of the coronavirus.—AFP
BOSTON: The departures area is nearly empty in the international terminal of Logan Airport on Friday. The Trump administration has banned all non-US citizens from flying from continental Europe to the US in an effort to slow the ongoing spread of the coronavirus.—AFP

SYDNEY: The fallout from the coronavirus spread across the Pacific on Friday, with Australian travel firms issuing profit warnings and Japanese carriers cutting capacity, while US airlines rushed to cut flights to Europe in the wake of new travel restrictions.

US travel curbs on much of continental Europe announced by President Donald Trump on Wednesday deepened the sector’s misery that began after the virus emerged in China late last year and reduced traffic.

United Airlines Holdings Inc warned of US travel disruption as the virus spreads domestically and major tourist attractions like Walt Disney Co’s theme parks in California and Florida said they would close.

American Airlines Group Inc and United said they would continue normal flights to and from Europe for the next week but would be reducing capacity to Europe by around 50 per cent in April.

American also said it was cutting international capacity by 34pc for the summer travel season and accelerating the retirement of its Boeing Co 757 and 767 planes.

Delta Air Lines Inc also said it would significantly reduce its US-Europe schedule after Sunday as it continues to watch customer demand.

German airport operator Fraport said on Friday that passenger numbers at its key Frankfurt airport dropped by around 30pc in the first week of March due to the coronavirus epidemic.

“We have to assume that the strong decline in air traffic volumes will continue during the next few weeks and months,” CEO Stefan Schulte said in a statement.

Air France KLM SA said on Friday that it had drawn down on 1.1 billion euros ($1.2bn) worth of its revolving credit facility to help its financial position.

The International Air Transport Association (IATA), a global industry group representing airlines, called on governments to consider extending lines of credit, reducing infrastructure costs and cutting taxes.

IATA last week estimated that the crisis could wipe out some $113bn of industry revenue, in a forecast that did not include the US clampdown on European travel.

“There is a heightened concern there will be increased airline bankruptcies in 2020 given the fallout from the coronavirus,” Cowen analyst Helane Becker said.

“We expect some governments to step in to help some airlines, but ultimately we expect more airlines to fail this year than last year,” she said in a note to clients, citing Cirium data that 41 airlines with 324 aircraft went bankrupt last year.

Cash-strapped low-cost carrier Norwegian Air Shuttle ASA said on Thursday it would cut 4,000 flights and temporarily lay off up to half of its employees due to the coronavirus outbreak.

The Indian government said it would extend the deadline for submission of early bids for ailing state carrier Air India until April 30 in part due to the virus situation.

Asia-Pacific hit hard

Virgin Australia Holdings Ltd, Auckland International Airport Ltd, Flight Centre Travel Group Ltd and Corporate Travel Management Ltd said they would take hits to earnings from reduced travel demand.

Australia’s No. 2 carrier, Virgin Australia, said it would offer discounted fares and cut some flights from Sydney to Los Angeles as demand for trans-Pacific travel fell.

Published in Dawn, March 14th, 2020