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Growing Coronavirus Contagion Puts Travel Industry Under Siege

Growing Coronavirus Contagion Puts Travel Industry Under Siege
Travel companies across the Pacific sounded alarm because of the economic fall out of the spread of the coronavirus with profit warnings being issued by Australian travel firms and capacity slashing by Japanese carriers. On the other hand, airlines in the United States are rushing to curt flights to and from Europe given the decision of the Trump administration to impose new travel curbs from Europe.
The global travel industry that was already suffering because of the coronavirus spread and curbs on travelling and quarantine measures in many parts of the world were dealt another blow after the travel curbs were announced by the US.
Warning of travel disruptions in the US was issued by United Airlines Holdings Inc with the domestic spreading of the virus in the country and announcement of closure of many of the major tourist attractions such as Walt Disney Co’s theme parks in California and Florida.
While assuring that they would continue to operate normal flights to and from Europe for the next week, American Airlines Group Inc and United said that they would cut flights and capacity by about 50 per cent to the continent of Europe next month.
American also said that it would be accelerating the retirement of its Boeing Co 757 and 767 planes and reducing its international capacity by 34 per cent for the summer travel season. There would be significant reduction in capacity in its US-Europe flights after Sunday, Delta Air Lines Inc also said and added that it was closely watching consumer demand.
There has been about 30 per cent drop in the number of passengers in the first week of March due to the coronavirus epidemic at the key Frankfurt airport, said German airport operator Fraport on Friday. “We have to assume that the strong decline in air traffic volumes will continue during the next few weeks and months,” CEO Stefan Schulte said in a statement.
On the other hand, Air France KLM SA has had to draw funds from an 1.1 billion euros or $1.2 billion worth of its revolving credit facility to augment its current financial position, the company said on Friday.
Governments were urged to contemplate extension of lines of credit, reducing infrastructure costs and cutting taxes for the airline industry by the International Air Transport Association (IATA), a global industry group representing airlines. According to the industry body’s estimates released last week, the coronavirus crisis could have a major impact on the global airline business with an expected loss of about $113 billion in industry revenue. That forecast excluded the economic impact of the spread of the coronavirus in the US and Europe.
“There is a heightened concern there will be increased airline bankruptcies in 2020 given the fallout from the coronavirus,” Cowen analyst Helane Becker said. “We expect some governments to step in to help some airlines, but ultimately we expect more airlines to fail this year than last year,” she said in a note to clients, citing Cirium data that 41 airlines with 324 aircraft went bankrupt last year.

Christopher J. Mitchell

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