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.