Virus sick­ens travel in­dus­try, leaves it strug­gling to sur­vive

Orlando Sentinel - - Wall Street Report - By Josh Boak and David Koenig

U.S. air travel down al­most 90% from a year ago. A ghostly empti­ness at Hawaii’s tourist ho­tels. De­serted Las Ve­gas casinos count­ing the days to re­open­ing.

Few sec­tors of the econ­omy have en­dured as much dev­as­ta­tion from the coronaviru­s as the travel busi­ness. Sur­vey­ing the wreck­age, econ­o­mists and com­pany lead­ers say it will take years to re­gen­er­ate the $1.1 tril­lion the in­dus­try pro­duced last year, po­ten­tially leav­ing many air­lines, ho­tels, rental car com­pa­nies and res­tau­rants in peril.

As long as travel re­mains de­pressed, the econ­omy could strug­gle to ac­cel­er­ate. About 10% of all jobs flow from the travel sec­tor. In­dus­try­wide un­em­ploy­ment now tops 50%, gov­ern­ment re­ports sug­gest, a level that could presage bank­rupt­cies and busi­ness clo­sures. Spend­ing by busi­ness and leisure trav­el­ers had pro­vided an en­gine of growth that helped power the econ­omy un­til the virus struck.

“While the rest coun­try is mov­ing of the into a re­ces­sion,” said Tori Emer­son Barnes, an ex­ec­u­tive at the U.S. Travel As­so­ci­a­tion, “the travel in­dus­try is al­ready in a de­pres­sion.”

The in­dus­try’s col­lapse is un­ri­valed in re­cent mem­ory. The clos­est par­al­lel, the 9/11 at­tacks, closed air­ports for four days. The in­dus­try needed roughly two years to match its pre­vi­ous pas­sen­ger lev­els. The cost this time is es­ti­mated at nine times the dam­age from 9/11, Barnes said.

The in­dus­try was once a re­li­able gauge of eco­nomic health. From busi­ness peo­ple on high-priced over­seas trips to tourists fly­ing to Dis­ney World, the in­dus­try ben­e­fited from steady spend­ing. Not this time. Travel might be one of the last sec­tors to re­cover.

“Usu­ally travel would be a good lead­ing in­di­ca­tor of con­fi­dence and dis­cre­tionary spend­ing,” said Gre­gory Daco, chief U.S. econ­o­mist for Ox­ford Eco­nomics. “But in the wake of the global coronaviru­s re­ces­sion, it’s likely to be a lag­ging in­di­ca­tor.”

With rev­enue all but dried up, U.S. air­lines are burn­ing through cash and plan­ning for lay­offs this fall, when a no-lay­offs pro­vi­sion in fed­eral aid to the car­ri­ers will ex­pire. That aid in­cludes nearly $25 bil­lion in pay­roll as­sis­tance and l $25 bil­lion in loans.

Even be­fore then, Amer­i­can and United Air­lines have said they will slash man­age­ment and sup­port staff by 30% — about 8,500 jobs be­tween them. Delta has launched an early-re­tire­ment of­fer and warns of lay­offs if there aren’t enough tak­ers. Those moves don’t in­clude the tens of thou­sands of union pilots and flights at­ten­dants who are likely to be fur­loughed in Oc­to­ber.

The U.S. Travel As­so­ci­a­tion is urg­ing the gov­ern­ment to pro­vide more help through in­di­vid­ual tax cred­its worth up to $4,000 for do­mes­tic trav­el­ers. The in­dus­try also wants to make busi­ness meals and en­ter­tain­ment fully tax-de­ductible for com­pa­nies.

Stock mar­ket in­vestors are em­brac­ing a fu­ture with less travel. Shares in Zoom, the now-ubiq­ui­tous video con­fer­ence com­pany, have more than dou­bled since mid-Fe­bru­ary. Delta, United and Amer­i­can, the na­tion’s three largest air­lines, are worth — com­bined — $27 bil­lion less than Zoom.

CHAR­LIE RIEDEL/AP

A man checks flight info at nor­mally full boards at Harts­field-Jack­son air­port in At­lanta.

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