Virus sickens travel industry, leaves it struggling to survive
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.
A man checks flight info at normally full boards at Hartsfield-Jackson airport in Atlanta.