TRAVEL: Airlines will be hit hard by coronavirus

The history of past pandemics augurs badly for the travel industry

Feb 3rd 2020 – Graphic detail – The Economist

STOCK MARKETS IN China fell by nearly 8% on February 3rd—the largest single-day fall since 2015—as fears about the economic impact of the Wuhan coronavirus increased. Of the industries affected by the epidemic, perhaps none will be hit as hard as travel.

In recent weeks, hotel occupancy in China has fallen by 45% year-on-year, according to analysts at Citigroup, a bank. Shares in China’s three biggest airlines—Air China, China Eastern Airlines and China Southern Airlines—have fallen by more than 20% since the first person died from the new strain, known as 2019-nCoV, on January 9th. The death toll in China has risen to 361. And the first death from the strain has been reported abroad, in the Philippines.

Investors in Chinese aviation are right to be nervous. Some previous pandemics have caused huge drops in airline traffic.           

From peak to trough, Asian airlines’ monthly passenger numbers dropped by 35% after the SARS outbreak in 2003; for Cathay Pacific, Hong Kong’s flag carrier, traffic fell by nearly 80%. The impact on some airlines of the Ebola outbreak, which started in West Africa in 2014, was still more severe. International air-passenger arrivals in Sierra Leone, for instance, plunged by 93%.

Tourists and business travellers may think that staying away from affected places is entirely rational during such outbreaks. But the World Bank estimates that 90% of economic losses during any outbreak arise from “irrational” efforts of the public to avoid infection in ways that do no such thing. Tiffany Misrahi of the World Travel & Tourism Council, an international trade body, notes that Ebola had a catastrophic impact on African tourism, whether or not a country was host to Ebola infections or not. Tanzania—a country over 3,000 miles from the Ebola outbreak—never had a single case of the disease, yet saw hotel bookings fall by up to 50% in October 2014 because of worries about the virus. SARS also had consequences far beyond Asia. A drop in air travel in North America caused by the outbreak caused a wave of bankruptcies and consolidation among airlines based there (although these had already been financially weakened by the recession that followed the 9/11 terrorist attacks).

The travel industry should brace for major disruption as governments impose travel bans on Chinese visitors to stop the spread of the disease. On February 3rd the United Arab Emirates, one of the world’s biggest air-travel hubs, said it will suspend flights to and from Chinese destinations outside Beijing. It is unlikely to be the last to do so.

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