Why Coronavirus Is Having a Bigger Impact on Global Airlines Than 9/11 | WSJ

Summary

The coronavirus epidemic has led to a drastic reduction in air traffic, with an 80% drop at China's busiest airports and a significant global capacity decrease. The aviation industry faces a financial hit, with airlines like American Airlines experiencing a complete halt in flights to China post-Chinese New Year, a period typically marked by increased ticket sales. The cost of grounded aircraft, including maintenance and crew salaries, is substantial, with new wide-body aircraft costing up to $50,000 a day. Layoffs and unpaid leave are becoming common as airlines like Cathay Pacific and Asiana Airlines struggle to cope. The International Air Transport Association (IATA) forecasts a $29.3 billion revenue loss for 2020, surpassing the impact of previous crises like SARS and 9/11. The industry anticipates a longer recovery period than past events, with global airlines seeking government support to mitigate the damage.

Takeaways

• 😷 The coronavirus epidemic has caused a significant reduction in air travel, leading to canceled flights and quiet airports.
• 📉 There has been an 80% drop in traffic at China's busiest airports due to the epidemic.
• 🌐 The global capacity reduction is greater than that experienced after SARS and 9/11, indicating a substantial impact on the aviation industry.
• 💸 The financial implications are severe, with suspended flights and routes causing huge losses for airlines.
• 🔍 China, being the second-largest aviation market, has seen airlines like American Airlines reduce flights from 28 per week to zero.
• 📈 The cancellations and suspensions occurred post-Chinese New Year, a period when airlines typically see increased ticket sales.
• 💼 The cost of grounded aircraft and idle crew, along with maintenance needs, adds to the financial burden on airlines.
• 🛫 Cathay Pacific and Asiana Airlines have asked staff to take unpaid leave, and Hong Kong Airlines announced layoffs to ensure survival.
• 💰 IATA forecasts a $29.3 billion loss in revenue for 2020, a significant blow compared to the $1.7 billion lost due to the Icelandic volcano eruption.
• ⏳ The industry is preparing for a long-term impact, with recovery times expected to be longer than those following SARS or 9/11.
• 🌟 The global airline industry may contract for the first time since the Financial Crisis, with airlines seeking government support similar to post-SARS measures.

Q & A

What is the current situation of airports and flights due to the coronavirus epidemic?

Airports are eerily quiet with many flights canceled, leading to a significant drop in air traffic. The video shows a stark comparison between the number of planes flying above China one year ago and the current situation.

How has the coronavirus epidemic affected air traffic at China's busiest airports?

The epidemic has caused an 80% drop in traffic at China's busiest airports, which is a substantial decrease compared to normal operations.

What is the comparison of the reduction in global aviation capacity due to the coronavirus with past events like SARS and 9/11?

The reduction in global capacity due to the coronavirus is greater than it was following SARS and even greater than after 9/11, indicating a more significant impact on the aviation industry.

What financial implications are airlines facing due to the suspended flights and routes?

The financial implications are huge, with airlines experiencing a significant loss in revenue due to the cancellation of flights and routes, especially after the Chinese New Year when airlines typically see a boost in ticket sales.

How has the coronavirus outbreak impacted the frequency of flights by international airlines to China?

The frequency of flights by international airlines to China has dropped dramatically. For example, American Airlines, which previously flew as many as 28 flights weekly, has seen that number drop to zero.

What are the daily costs associated with not flying a narrow-body and a wide-body aircraft?

The daily costs of not flying a narrow-body aircraft are around $10,000, while a wide-body aircraft can cost as much as $50,000 a day, even when they are not in operation.

Which airlines have taken measures like asking staff to take unpaid leave or laying off workers due to the coronavirus?

Cathay Pacific and Asiana Airlines have asked thousands of staff to take unpaid leave, and Hong Kong Airlines announced it would lay off 400 workers to ensure its survival.

What is the projected revenue loss for the global airline industry in 2020 according to IATA?

IATA is forecasting a $29.3 billion loss in revenue for the global airline industry in 2020 due to the coronavirus epidemic.

How does the impact of the coronavirus on the aviation industry compare with the impact of the Icelandic volcano eruption in 2010?

The impact of the coronavirus is expected to be much greater than the Icelandic volcano eruption in 2010, which cost the industry $1.7 billion in lost revenue.

What is the expected duration of the impact of the coronavirus on the aviation industry, and how does it compare with past events like SARS and 9/11?

The expected duration of the impact is uncertain, but it is anticipated to last longer than the impacts of SARS and 9/11. The recovery time for airlines after SARS took several months, and after 9/11, it took about nine months for the industry to recover.

How might the coronavirus epidemic affect the global airline industry in terms of growth?

The epidemic could cause the global airline industry to contract for the first time since the Financial Crisis, marking a significant shift from years of fast growth.

What types of airlines are expected to be affected by the coronavirus outbreak?

The impact is expected to be widespread, affecting virtually every airline that operates in and out of China, regardless of size or specific type.

Outlines

00:00

😷 Impact of Coronavirus on Aviation

The script describes the drastic effects of the coronavirus epidemic on the aviation industry, with a significant drop in flight traffic and airport activity. It highlights an 80% decrease in traffic at China's busiest airports and compares the current situation to previous crises like SARS and 9/11, suggesting a more severe impact. The financial implications are discussed, with airlines experiencing massive losses due to suspended flights and routes. The script also mentions the economic importance of China's aviation market and the high costs associated with grounded aircraft, leading to staff being asked to take unpaid leave and potential layoffs.

Keywords

💡Coronavirus epidemic

The coronavirus epidemic refers to the outbreak of a novel coronavirus, which has led to a global pandemic. In the context of the video, it is the primary cause of the drastic reduction in air travel and the aviation industry's crisis. The script mentions the impact on flights and airports, highlighting the epidemic's role in causing an 80% drop in traffic at China's busiest airports.

💡Aviation industry

The aviation industry encompasses all businesses and services related to flying, including airlines, airports, aircraft manufacturing, and maintenance. The video discusses the severe financial implications this industry faces due to the coronavirus epidemic, such as suspended flights, grounded planes, and significant revenue losses.

💡Capacity reduction

Capacity reduction in the aviation context refers to the decrease in the number of available seats for passengers due to grounded flights. The script indicates that the reduction in global capacity is greater than it was after the SARS outbreak and 9/11, emphasizing the scale of the impact on the industry.

💡Financial implications

Financial implications refer to the economic consequences or effects of a situation. In the video, the financial implications of suspended flights and routes are highlighted, with airlines facing huge costs for maintaining grounded aircraft and paying idle crew members.

💡Chinese New Year

Chinese New Year, also known as Spring Festival, is a significant holiday in China that usually boosts ticket sales for airlines. The script notes that the cancellations and suspensions of flights occurred directly after this period, exacerbating the financial hit to the industry.

💡Airspace

Airspace is the portion of the atmosphere controlled by a country for aviation purposes. The video uses the term to illustrate the dramatic decrease in air traffic over China, comparing the number of planes flying before and during the epidemic.

💡Cathay Pacific

Cathay Pacific is an international airline based in Hong Kong. The video mentions Cathay Pacific as one of the airlines that has asked thousands of staff to take unpaid leave due to the impact of the coronavirus on air travel.

💡IATA

IATA stands for the International Air Transport Association, a trade association of the world's airlines. The script cites IATA's forecast of a $29.3 billion loss in revenue for 2020, indicating the severity of the industry's financial challenges.

💡Unpaid leave

Unpaid leave refers to a period of absence from work without pay. The video discusses how airlines like Cathay Pacific and Asiana Airlines have asked staff to take unpaid leave as a measure to cope with the reduced demand for air travel due to the epidemic.

💡Layoffs

Layoffs involve the termination of employment for a group of workers. The script mentions that Hong Kong Airlines announced it would lay off 400 workers, indicating the extreme measures airlines are taking to survive the crisis.

💡Global economy

The global economy refers to the economic activities and interactions of countries across the world. The video discusses how China's significant role in the global economy, being 19% of it, amplifies the impact of the epidemic on the aviation industry compared to previous crises like SARS.

Highlights

The coronavirus epidemic has caused a drastic reduction in flights and activity at airports.

There has been an 80% drop in traffic at China's busiest airports due to the epidemic.

The global capacity reduction is greater than post-SARS and post-9/11.

The aviation industry is facing a financial crisis due to suspended flights and routes.

China is the second biggest aviation market globally, with significant flight reductions.

Cancellations post-Chinese New Year have negatively impacted airlines' revenue.

The cost of grounded aircraft includes daily expenses and maintenance.

Cathay Pacific and Asiana Airlines have asked staff to take unpaid leave due to financial strain.

Hong Kong Airlines announced layoffs to ensure survival.

IATA forecasts a $29.3 billion loss in revenue for 2020.

The industry is preparing for a longer-lasting impact than SARS or 9/11.

The global economy's reliance on China has increased, amplifying the epidemic's impact.

The recovery time for airlines after SARS was several months.

The industry is uncertain about the duration of the coronavirus impact.

The epidemic could lead to the first contraction in the global airline industry since the Financial Crisis.

Airlines are seeking government support similar to post-SARS measures.

The impact is expected to affect airlines across all sizes and types.

Transcripts

- [Narrator] Canceled flights, empty planes,

and eerily quiet airports.

This is what the impact of the coronavirus epidemic

looks like through the lens of travelers,

and the effect is visible in the skies too.

One year ago,

this is how many planes were flying above China,

and now, that same airspace looks like this.

The epidemic has led to an 80% drop

in traffic at China's busiest airports.

The reduction in global capacity

measured by how many seats remain grounded

is greater than it was following SARS

and even greater than after 9/11.

- I think we have a whole different ball game now

compared to the 2001, 2003 issues.

- [Narrator] So what impact is this having

on the aviation industry?

- If we look back in 10 years' time,

will this be seen as a blip or a game-changer?

(equipment humming)

- [Narrator] The financial implications

of suspended flights and routes are huge.

- China's become the second biggest aviation market globally

with airlines like American Airlines

flying as many as 28 flights weekly.

Obviously, now with the coronavirus outbreak,

that's dropped down to zero.

- [Narrator] To make matters worse,

the cancellations and suspensions

came directly after Chinese New Year

when airlines normally see a boost in ticket sales.

- [Ian] Beyond impacting just Chinese air traffic,

you're looking at where do those passengers connect

beyond China, where do they go when they're departing China?

- A narrow-body aircraft is costing in the order

of $10,000 a day, whether that's been financed

or whether it's being leased.

If you're not flying it,

it's not just the $10,000 per day per aircraft.

You've got crews sitting around,

flight crews, cabin crews,

yet the aircraft itself will still need maintenance.

A new wide-body aircraft is going to be costing

as much as $50,000 a day.

- [Narrator] Cathay Pacific and Asiana Airlines

have both asked thousands of staff to take unpaid leave.

Hong Kong Airlines announced it would lay of 400 workers.

Its chairman said the changes

were about ensuring its very survival,

as reported by local media.

Globally, IATA is forecasting

a $29.3 billion loss in revenue for 2020.

For context, the Icelanic volcano eruption

that disrupted air traffic across Europe for several days

cost the industry $1.7 billion in lost revenue.

Though nobody knows how long the epidemic will last,

the industry is already bracing for a hit

that is expected to be harder than after 9/11 or SARS.

- [Ian] SARS is kind of the benchmark here.

The global share of the Chinese economy

was so much lower than it is now,

and now, where China's 19% of the global economy,

it's a much bigger impact.

- With the SARS outbreak in 2003,

we saw it took a number of months for the airlines

to recover both demand and profits.

What we're really waiting to see now

is how long the impact of the coronavirus will be,

and that really depends on when we hit peak,

for which we really have no estimate at the moment.

Back in 9/11 in 2001,

it took about nine months before we saw

really the industry recover from the impact of the events.

Now, with the coronavirus, it's a very different situation

and it's difficult to give an assessment,

but analysts are expecting that with the coronavirus,

this could actually last quite a bit longer.

- [Narrator] After years of fast growth,

the epidemic could cause the global airline industry

to contract for the first time since the Financial Crisis

according to industry analysts.

Airlines say they're looking into ways to limit the damage,

with Chinese companies hoping they will get support

from the government like they did after SARS

with bailouts, tax breaks, and mergers.

- In terms of the types of airlines

that could be affected by this,

it could really be across the whole spectrum.

It won't just be small airlines or large airlines

or airlines with a specific type.

This will be impacting virtually every airline

that operates in and out of China.

(pleasant electronic tones)