The Coronavirus’ Effect on the Airline, Hotel & Travel Industry

The Coronavirus pandemic the airline, hotel and travel industry, including all of the many sectors that serve it, such as online booking sites, caterers and convention centers. The United Nations World Tourism Office (UNWTO) estimated that the travel industry suffered export revenue losses of $1.3 trillion during all of 2020. International arrivals fell 74% from 2019 (compared to a 4% drop during the 2009 global economic crisis). This put between 100 million and 120 million jobs at risk. For airlines, passenger numbers plummeted, while hotel bookings dropped to dismal levels.

Coronavirus-Related Factors:

= In many nations, borders were closed to foreign travelers, or countries required travelers to undergo 14-day quarantines upon arrival.

= Public events, meetings, sports events, conventions and gatherings of all types that would have attracted travelers were cancelled, from destination weddings to sports events.

= Cruise lines cancelled sailings and anchored their ships, deterring millions of would-be vacationers worldwide. Many lines returned to cruising in late 2021.

= The travel industry is forced to spend heavily on supplies and staff for new sanitization practices.

According to the International Air Transport Association (IATA), global airlines lost a collective $126.4 billion in 2020. Airline passenger volumes dropped 66% for the year. Airline companies are drastically reducing total numbers of flights and retiring older aircraft. For example, British Airways, Qantas and Virgin Atlantic are retiring their fleets of Boeing 747s due to age as well as engines that are not fuel efficient. Delta is retiring its fleet of Boeing 777s by the end of 2020. American Airlines plans to place its Airbus A330-200 planes into long-term storage until at least 2022. In countries around the world, governments stepped up to subsidize airlines, but the support will be finite. In the U.S., many airlines are expected to conduct major layoffs starting October 1, 2020 when federal support under the CARES Act of 2020 stops. (Plans could change if further federal funding emerges.) American Airlines announced plans to cut 19,000 jobs at that time, including thousands of pilots and about 8,100 flight attendants. This is a huge shift from 2019, where the industry was concerned about a looming shortage of qualified pilots.

A number of airlines declared bankruptcy in the early months of 2020. Britain’s Flybe entered administration (a practice similar to bankruptcy) in March 2020, as did Trans States Airlines and Compass Airlines in the U.S. Virgin Australia entered voluntary administration in April 2020 while Columbia’s Avianca and Chile’s Latam Airlines filed for bankruptcy in May. Aeromexico filed in July. Watch for further bankruptcies as the slow travel market continues.

Companies are curtailing business travel almost completely, as significant numbers of employees are working from home and meetings are happening virtually via telepresence sites such as Zoom. On the airline side, many analysts believe that business travel may never return to pre-Coronavirus levels. This lack of business travel has a painful effect on related sectors, such as meeting planners, convention centers, restaurants, airport operators and car rental firms. Those company traveler expense account funds are sorely missed.

The pandemic also caused a near-total shutdown of the global cruise industry. Virtually every cruise ship in the world was sitting at anchor, empty of passengers as of Spring 2020. Although under significant financial strain, most major cruise operators are incorporated overseas, and therefore ineligible for funding from U.S. federal government stimulus packages. Most cruise lines were planning to have many ships underway again by late 2021.

Road trips became a focus for many vacationers. Many people now prefer driving their own vehicles to a nearby beach or mountain destination to dealing with the Coronavirus-induced issues of flying and/or car rental. Likewise, many people in the United States took to camping and even buying or renting RVs (recreational vehicles) for self-contained vacationing in the great outdoors.

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