In an ironic twist, the very industry that may have been conducive to the global spread of coronavirus is now suffering at the virus' infectious hands.
European and American airline carriers' stock prices have declined rapidly over the past few weeks, with cancelled flights due to travel bans and coronavirus concerns warranting a plea for more than $50 billion in government aid. Lawmakers and labor unions are pushing for the aid in order to also cover worker and consumer protections.
"We have told Congress that any funds for the aviation industry must come with strict rules," said Sara Nelson, president of the Association of Flight Attendants, which represents some 50,000 cabin crews at United (NASDAQ: UAL), Alaska (NYSE: ALK), Spirit (NYSE: SAVE) and others. "That includes requiring employers across aviation to maintain pay and benefits for every worker. No taxpayer money for CEO bonuses, stock buybacks or dividends. No breaking contracts through bankruptcy."
Last week, the International Air Transport Association (IATA), a trade group, forecasted that worldwide revenues could plummet by around $113 billion this year. This amounts to one-fifth of last year's overall revenues, and is four times higher than the value that IATA predicted in February, when the coronavirus was still believed to be an exclusively Chinese problem rather than a global one.
Cathay Pacific (OTC: CPCAY), which is based in Hong Kong, cut its capacity by 65% in March and April, and expects more cuts in May. Korean Air has already erased 80% of its schedule.
Domestic carriers have also been affected as people restrict intra-country travel, particularly in Europe which is seen as the epicenter of the crisis yet was so used to free-flow travel within the continent. US-based Delta (NYSE: DAL) said it may have to cut international schedules by 40%, up from a 25% reduction before the ban. Lufthansa (OTC: DLAKY), Europe's biggest carrier, had already cut flights in half for April. Other carriers that serve small domestic markets and rely on global interconnections may need to shut down altogether, since many people who travel on such flights are tourists or business people that are anyway barred from international travel and work respectively.
There is also the global supply chain issue, in which travel bans have halted the import and export of certain goods since carriers now cannot shuttle cargo to and from certain countries.
"This is the most challenging period for aviation and package holiday businesses we have witnessed," Richard Moriarty, head of the Civil Aviation Authority in the U.K. said in a statement on Sunday. "The threat to the survival of some businesses is real the longer this goes on," he said. "They will need to take very difficult actions to secure sufficient liquidity."
Many airline executives are hoping that the post-corona recovery period will follow the same trajectory as in the precedent has demonstrated, such as the terrorist attacks of September 11, 2001 or the global financial crisis of 2007-09. After a few months of disarray, travel patterns then reverted to normal trends and growth continued on an upward path. In fact, many college students who were supposed to go on spring break have not cancelled their flights, but pushed them further up in the summer.