With people putting off travel plans thanks to the novel coronavirus, things are starting to look grave for the world’s airlines. I mean, really grave. As in, passenger numbers are tanking so badly that executives are going ahead and comparing it to the aftermath of the Sept. 11 terror attacks.
Some context: 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. Meanwhile, United and JetBlue are planning to cut back on flights to reduce losses, and an industry group—the International Air Transport Association—is now predicting that, globally, carriers will lose between $63 billion and $113 billion in passenger revenue this year. Per CNN:
The losses would be similar to those experienced by the aviation industry during the global financial crisis of 2008, IATA warned as it dramatically increased its estimate of the damage caused by the outbreak. It said airlines could lose 19% of their business if the virus isn’t contained soon.
Just two weeks ago, IATA had been expecting lost sales in the range of $30 billion.
“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.”
This is all a rather poor sign for where the economy is headed. I mean, yes, everyone was already afraid that this dumb plague was going to plunge us into a recession. But, as economists at the U.S. Bureau of Transportation Statistics have found, declines in travel are a pretty reliable leading indicator that a downturn is on the way. It’s a sign that something is wrong (in this case, an almost-pandemic that’s keeping people home). And when people don’t fly, they don’t spend money on hotels, or rental cars, or restaurants in destination cities either, which deepens any economic pain.
The one upside to all of this is that you can find some magnificently cheap airfares right now (Bloomberg found a $50 round-trip ticket from New York to Miami), and airlines are doing things like waiving change fees for flights purchased in the next month or so. I, for one, am now considering an impromptu vacation because, as an instinctual fatalist who can’t stop touching my face, I’m basically resigned to getting this virus anyway. Might as well get a trip to the beach out of it.
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