Feature
As major companies begin to
cancel conferences and travel plans around the globe, it is obvious that this
will have cascading effects on aviation and travel business. Wole Shadare
writes
Air travel in disarray
The travel industry is in
total disarray. Never has air travel taken a hit like what is presently
experienced occasioned by deadly Coronavirus that is ravaging the world. As the
coronavirus continues to spread outside of China, air travel is seeing some big
impacts. Airlines have cut nearly 500, 000 flights because of travel
restrictions.
Many major airlines across
the globe have suspended flights to mainland China and Hong Kong.
Death toll
The Global Business Travel
Association warned recently that the virus could cost the travel industry close
to $560 billion this year in revenue, a third of the 2020 forecast business
travel spending as trips to Europe, Asia and elsewhere are called off because
of the virus. Until last week, there were still hopes that the business impact
of the coronavirus would be limited. The travel industry was using as a
benchmark the 2003 SARS outbreak, which hit 26 countries, killed 774 people and
caused a six-month dip in global travel.
As at last week, coronavirus
had killed over 2,800 people. Nigeria reported first case of coronavirus last
week Friday. The announcement shook the nation as authorities are looking for
solution and trying to curb its spread.
Although it can be argued
that the coronavirus is not as dangerous as many people fear — perhaps not so
much worse than the flu — or that travelers are over reacting, it could,
however, reach panic stage quickly, and when that happens, rational thought
disappears.
Airlines, consumers panic
Airlines are more susceptible
to panics than many businesses. No matter what, people need groceries,
household staples, and clothing, but travel is often discretionary. Whether for
leisure or business, most people do not need to fly.
Just like consumers in
countries with current outbreaks, people will delay or cancel trips, believing
the risk of getting sick is not worth it. It is believed that some people are
already waffling on buying summer trips, hoping to see how this plays out; but
now, they are probably wondering if the trip to see grandma in Denver, London,
New York, Italy is worth the risk
The effect is huge
considering that many global events have already been put off. The world’s
biggest travel industry event, ITB Berlin, has been cancelled due to the rapid
spread of coronavirus.
Uncertainty
Airlines, already buffeted
by a big drop-off in flights to Asia, have been hit particularly hard. On
Friday, Lufthansa said it was slashing its short-haul flights by up to 25 per
cent as demand slumped.
British Airways parent
company, IAG, warned that the uncertainty meant it could not provide a profit
outlook for 2020; its shares fell eight per cent and are down by a quarter in
10 days.
Amid a flurry of deep
cleaning at their headquarters, hundreds of businesses, including
multinationals such as BP, BMW, Orange and Estée Lauder, have suspended travel
to countries with outbreaks of the virus and imposed quarantines on any
returning from those regions. Others such as Nestlé, which has 352,000
employees, and L’Oréal, which has 86,000 employees, have gone further —
cancelling all international travel for at least a month.
IATA’s forecast
The International Air
Transport Association (IATA) predicts demand for air travel will fall for the
first time in more than a decade.
Airlines in China and other
parts of the Asia Pacific region are expected to take the vast majority of the
impact. It comes as carriers around the world have been forced to reduce
flights.
In total, airlines in the
Asia Pacific region are set to see a $27.8bn revenue loss in 2020, while those
outside Asia are expected to lose $1.5 billion in revenue, IATA has forecast.
Of that figure, IATA
predicts that carriers in China are set to lose revenue of $12.8 billion in
their home market alone.
“Airlines are making
difficult decisions to cut capacity and in some cases routes,” said IATA’s
director-general Alexandre de Juniac. “This will be a very tough year for
airlines.”
The forecast also assumes
that the virus remains centred on China, but IATA warned the effect could be
far worse if the infection spreads further in the region.
IATA had previously forecast
that the Asia Pacific region would be the biggest driver of air travel demand
between 2015 and 2035, with four of the five fastest-growing markets in terms
of passengers being from Asia.
On Thursday, two major
airline groups warned of a severe financial impact as a result of the
coronavirus hitting demand for travel in Asia.
Australia’s Qantas said the
outbreak would cost it up to A$150 million ($99m; £76m), while European
carrier, Air-France KLM, put the cost at up to 200 million ($213m; £168m) for
the period between February and April.
A Travel expert, who
preferred anonymity, said most travelers were having a period of “wait and see.
“They’re assessing things. The same way we saw with SARS, MERS, Ebola, and
Zika. They’re waiting to see. They want to see exactly how far this is going,
how serious it is, whether it’s going to affect them. If anything, some
travelers are thinking about a backup plan.”
Airlines’ reaction
If this gets worse, U.S.
carriers are expected to act on several fronts. To assuage passenger concerns,
they may clean domestic airplanes more thoroughly, perhaps implementing similar
standards as for long-haul jets, which generally receive a full disinfecting
after each flight. They may also alter service, as more Asian airlines have
done, reduce interactions between flight attendants and customers.
To fill seats, they may
aggressively discount, seeking to boost demand by lowering prices. And to align
supply with demand, they may park jets to reduce capacity.
Last line
The virus will test
airlines’ reliance on high-paying corporate travelers. Carriers have also
poured millions into refreshing their cabins to cater to high-paying corporate
travelers.
Credit;
woleshadare.net
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