CoVid-19 could kill many airlines

The Cornoavirus CoVid-19 is already well ahead of the 2003-4 SARS outbreak not just for its effect on the global economy but on the effect it had on airlines.

The effects of the virus are already drastic for many airlines, especially in Asia. Take StarLux for example – literally in its first crucial weeks of operating, and its already having to curb routes and frequencies from Taiwan.

Its not just the virus, in China the US-Chinese trade war has affected traffic in cargo and passenger ailrines as far fewer Chinese travel globally, but had already sharply cut back on travel to the US. Underneath all of that is a growing spat over journalists and even tourists making cristical comments of Chinese leaders and getting into trouble with Chinese authorties.

Even more stress is being placed on Chinese aviation by the vanishing of tourists from the country – the river cruise industry and the major tourist sites are deserted. The same is happening in Europe, all over the place the normal high numbers of Chinese tourists, an all-year round phenomena, has fallen of a cliff. They’re also missing from Australia, Thailand and India.

Chinese domestic flights have dropped from 18,000 a day to 6,300.

HNA Group owned Hainan Airlines may be broken up – a combination of the groups excess and CoVid-19 speeding up the process of decline

The dropping of flights to China, now South Korea as well, is hitting Korean Airlines, all of the European operators – especially Finnair whose entire business model is based on Europe to North Asia operations, is increasingly severe.

With cases appearing in the Singapore, Hong Kong, Thailand, Taiwan, UK, US, Italy, Qatar, Bahrein and especially Iran, which is already believed to be heavily infected and has few medical facilities or the medicines (because of the US sanctions) to fight it, the spread is teetering on the brink of being out of control.

The stock markets are depressing airline share prices badly – easyJet fell 13% yesterday, many others are taking similar dives, all of which weakens their resilience and ability to raise capital if they get into awkward positions. Larger airlines will survive, but many of the smaller ones simply won’t if the virus becomes a true pandemic, which seems almost inevitable in the minds of financial risk takers.

The SARS virus hit global air travel by 5.1% – and most airlines suffered badly from that. This time IATA is forecasting 8.2% and that’s considered to be on the generous side, many think it’s more likely to be nearer 10%, with recovery taking 12-18 months.

The Chinese had 900 commercial aircraft in 2003. That’s 4,000 now. You’re looking at far deeper impact on that market alone in 2020. If the virus causes travel issues in the US and Europe the consequences for any airline with a difficult balance sheet are going to be terminal.

On top of all of that the European package holiday industry is heading towards key easter and summer vacation seasons – travel restrictions could devastate airlines and hotels across the continent.

Nobody wants this thing to get out of hand, but it seems entirely possible. Airlines are at the centre of transmission across the globe, the damage has probably already been done. It’s now just a matter of waiting to see how bad it gets and hoping it doesn’t get as bad as many fear it might.