Co­vid-19: De­vas­ta­ting Im­pact on Tou­rism Sec­tor and Com­mer­cial Flights

THIS NEW CO­RO­NA­VI­RUS OUTBREAK SPREAD THROUGH CHI­NA AND HAS HIT OTHER REGIONS OF THE WORLD. MEASURES ADOPTED HA­VE NEGATIVELY AFFECTED MULTIPLE AREAS

Excelencias Turísticas del caribe y las Américas - - Es­pe­cial / Spe­cial -

When the co­ro­na­vi­rus outbreak was an­noun­ced in Chi­na at the end of last year, no one thought it would be­co­me a glo­bal is­sue and reach the pan­de­mic pro­por­tions — as des­cri­bed by WHO (World Health Or­ga­ni­za­tion) — ever­yo­ne knows to­day. It is not only a health is­sue, but it has al­so th­rea­te­ned world eco­nomy.

A very im­por­tant ele­ment to high­light is that Chi­na — a country lo­ca­ted in the Asian-Pa­ci­fic re­gion with several pe­cu­lia­ri­ties — was the epi­cen­ter of this con­di­tion. This area groups a se­ries of na­tions that cons­ti­tu­tes to­day one of the areas with hig­her eco­no­mic growth in the world. If we look for da­ta from re­cent years, fo­re­casts in­di­ca­te this re­gion en­joys a sus­tai­ned in­crea­se in GDP. With the hig­hest population den­sity in the world, the com­mer­cial flight sec­tor has ex­pe­rien­ced an ongoing and ra­pid growth sup­por­ted by pas­sen­ger traf­fic, to and from the area; as well as wit­hin the coun­tries of the re­gion. The growth and con­so­li­da­tion of air­li­nes with their co­rres­pon­ding fleet of aircraft ha­ve been pa­ra­mount, not to men­tion the im­pact on the lei­su­re in­dustry with the con­se­quent in­crea­sed flow of tou­rists.

THE DILEMMA

One of the de­ci­si­ve measures ap­pro­ved to con­tain the co­ro­na­vi­rus outbreak has

res­ted on res­tric­tions on the flow of peo­ple from affected ci­ties and regions to ot­hers whe­re the vi­rus had not been reported yet. To ma­ke them ef­fec­ti­ve, the can­ce­lla­tion of flights was im­po­sed. Ac­tually, tho­se flights are the means of trans­por­ta­tion that sa­tisfy tra­ve­lers' needs. We are es­sen­tially re­fe­rring to mi­llions of tou­rists.

The first air­li­nes to can­cel all flights to Chi­na were Bri­tish Air­ways, Luft­han­sa, Uni­ted Air­li­nes, Del­ta Air Li­nes and Ame­ri­can Air­li­nes. Chi­ne­se air­li­nes with do­mes­tic flights, flights wit­hin the re­gion, and to Ame­ri­ca and Eu­ro­pe al­so can­ce­lled all their flights.

The co­ro­na­vi­rus, al­ready known as Co­vid-19, did not res­pect bor­ders and out­breaks were spot­ted in Ja­pan, South Ko­rea, Sin­ga­po­re, and iso­la­ted ca­ses in other na­tions of the re­gion.

Flight can­ce­lla­tion measures were ex­ten­ded to the affected coun­tries. Many be­lie­ved it was a pro­blem focused on the Asia-Pa­ci­fic re­gion only, but the vi­rus emer­gen­ce in Italy and Iran sho­wed the pro­blem had wor­se­ned.

When the epi­de­mic reached Italy, Co­vid-19 had al­ready affected 87,000 peo­ple in the world with mo­re than 3,000 deaths, most of them in Chi­na, while South Ko­rea had an­noun­ced 3,736 ca­ses.

On March 2, it was reported that the glo­bal ca­pa­city of air­li­nes had de­crea­sed by 3%, con­tras­ting with IATA's fo­re­cast ra­te of growth at 4.7% in the cu­rrent year.

One of the ques­tions com­mer­cial flights had to co­pe with was: how much mo­re will de­mand and ca­pa­city be re­du­ced, and which air­li­nes might not sur­vi­ve the cri­sis?

Meanw­hi­le, the­re were no red flags in Eu­ro­pe among air­li­nes with rou­tes bet­ween Eu­ro­pean coun­tries, es­pe­cially the so-ca­lled "low-cost" air­li­nes with an im­pact on tou­rist trans­por­ta­tion. But the de­ve­lop­ment of the epi­de­mic in Italy dar­ke­ned the pa­no­ra­ma.

Ac­cor­ding to da­ta com­pi­led by the Johns Hop­kins Uni­ver­sity Cen­ter for Sys­tems Scien­ce and En­gi­nee­ring, on March 6, 98,000 ca­ses were con­fir­med world­wi­de, of which 80,000 were spot­ted in main­land Chi­na, 6,593 in South Ko­rea, 3,858 in Italy, and 3,513 in Iran. Alt­hough South Asia see­med unaf­fec­ted, 30 ca­ses were reported in In­dia, fi­ve in Pa­kis­tan, and one in Bhu­tan, Ne­pal, and Sri Lan­ka.

THE EFFECTS

Air Fran­ce-KLM: KLM has re­du­ced re­cruit­ment and ca­pi­tal in­vest­ment in a cos­tsa­ving ef­fort amid lo­wer tra­vel de­mand due to the outbreak.

Eas­yJet: The bud­get air­li­ne has high­ligh­ted the im­pact on the de­mand for air tra­vel, par­ti­cu­larly on Ita­lian rou­tes. Hen­ce, it is reallo­ca­ting ca­pa­city, im­ple­men­ting a hi­ring free­ze, and has ma­de an of­fer to staff re­gar­ding un­paid lea­ve.

Fin­nair: The ope­ra­tor is analy­zing a cost-cut­ting measures pro­gram af­ter re­du­cing the ca­pa­city plans and de­cla­ring that re­sults will be "sig­ni­fi­cantly" lo­wer in the first se­mes­ter.

IAG (Bri­tish and Ibe­ria): The group is im­ple­men­ting ca­pa­city cuts on short trip flights in ad­di­tion to its Asian rou­tes. This un­cer­tainty trig­ge­red by the outbreak means that it can­not be is­sued a full-year outlook.

Luft­han­sa Group: The bu­si­ness is im­ple­men­ting a hi­ring free­ze and of­fe­ring staff un­paid lea­ve as part of the cost-sa­ving measures in the group. They say the ca­pa­city cuts are al­ready equi­va­lent to ha­ving 13 air­pla­nes on the ground.

Wizz Air: The low-cost air­li­ne sus­pends se­lect rou­tes to des­ti­na­tions in nort­hern Italy bet­ween March 11 and April 2, re­pre­sen­ting nearly 60% of its ca­pa­city for the country.

On the other hand, the stock mar­ket tran­sac­tions sho­wed the de­ve­lop­ment of the cri­sis. While ma­jor Eu­ro­pean stock in­de­xes, in­clu­ding tho­se of Ger­many, Fran­ce, the Be­ne­lux sta­tes and the Uni­ted King­dom, fell about 3-4% as the mar­kets ope­ned on February 24, the im­pact on air­li­ne sha­res has been mo­re subs­tan­tial.

Low-cost air­li­nes, which rely hea­vily on short-trip flights wit­hin Eu­ro­pe, see­med to be par­ti­cu­larly affected. Eas­yJet drop­ped by mo­re than 12% and Rya­nair by mo­re than 10%, with Wizz Air sha­res fa­lling 8.5%.

Air Fran­ce-KLM sha­res fell mo­re than 9% and SAS (Scan­di­na­vian Air­li­nes) fell 8.5%. Luft­han­sa Group's sha­re pri­ce drop­ped by al­most 8%, while that of IAG, pa­rent com­pany of Bri­tish Air­ways and

Ibe­ria, fell by mo­re than 7%. The lei­su­re com­pany TUI Group al­so fell 8%.

With the re­cent mea­su­re ap­pro­ved by the U.S. Pre­si­dent to can­cel all flights from Eu­ro­pe, the cri­sis took dra­ma­tic di­men­sions. The mea­su­re was hea­vily cri­ti­ci­zed by the Eu­ro­pean Par­lia­ment:

It af­fects one of the lar­gest mar­kets world­wi­de, taking da­ta from Ci­rium, 40 air­li­nes ha­ve 560 daily flights sche­du­led with a ca­pa­city of 160,000 seats, if we take it to a pe­riod of 30 days, the fi­gu­re shows an im­pact of 17,000 flights and 4.8 mi­llion seats. A sig­ni­fi­cant fact is that the th­ree lar­gest U.S. air­li­nes: Ame­ri­can Air­li­nes, Del­ta Air Li­nes, and Uni­ted Air­li­nes jointly operate 200 daily flights to Eu­ro­pe.

Chi­na, which has re­du­ced the num­ber of peo­ple in­fec­ted by the vi­rus, seems to be bea­ting the di­sea­se, but with a huge cost in re­ve­nue los­ses in the com­mer­cial flight sec­tor of 24.6 bi­llion Yuan ($3.52 bi­llion) with a drop in pas­sen­ger traf­fic of 84% com­pa­red to the sa­me pe­riod last year, reported the CAAC (Ci­vil Avia­tion Ad­mi­nis­tra­tion of Chi­na).

While the vi­rus con­ti­nues to spread to other coun­tries, new measures are loo­ming in an en­vi­ron­ment of un­cer­tainty. So­me hopes that everyt­hing will end soon and ot­hers fo­re­cast a dar­ker sce­na­rio. So­me air­li­nes will not be able to over­co­me the cri­sis, such as Bri­tish's Fly­be, which fell in ban­kruptcy. Ot­hers will co­me off badly and they will ha­ve to work hard on to get on track again. Tou­rism is fa­cing a tough cha­llen­ge that will cer­tainly im­pact negatively in the fo­re­seea­ble fu­tu­re.

SOUR­CES: FLIGHT GLO­BAL CI­RIUM

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