Airlines Slammed as Demand Plummets

Chinese officials quarantined 11 million people after the outbreak and continue to monitor the health of their citizenry.

Unless you’ve been living under a rock these past few months, you’ve heard all about the Coronavirus that first appeared in Wuhan, China last December. Public health experts across the globe are scrambling to understand, track and hopefully contain this new virus. This story is changing on a daily, even hourly, basis but here's a recap. The World Health Organization (WHO) named the virus COVID-19 which references the type of virus and year it emerged. There are nearly 130,000 confirmed cases across the globe and approximately 4,700 deaths. The vast majority of cases are in China but the rate of new cases there has slowed while large outbreaks of the disease have been reported in multiple countries, including South Korea, Iran and Italy. All of Italy’s 60 million people were ordered on lockdown this week as the number of reported cases approaches 13,000 with nearly 900 deaths attributed to the virus. There are more than 1,300 confirmed cases in the US with 38 deaths reported and 19 states have declared a state of emergency as of this writing. Infections have been reported on virtually every continent with the exception of Antartica. On Wednesday, the World Health Organization declared the coronavirus a pandemic, and on Friday President Trump declared a National Emergency.

Trump's Presidential Proclamation suspends for 30 days the entry of foreign nationals who have been in the Schengen Area of Europe.

President Trump announced a travel suspension from Europe for the next 30 days in his address to the nation on Wednesday evening, The US Department of Homeland Security said the order suspends the entry of most foreign nationals (not US citizens) who have been in most European countries (excluding the UK) at any point during the 14 days prior to their scheduled arrival into the US. Acting DHS Secretary Chad Wolf said his department will soon issue a notice “requiring US passengers who have been” traveling in parts of Europe to “travel through select airports where the US Government has implemented enhanced screening procedures.” Vice President Pence later explained in an interview with CNN that American citizens and legal residents returning to the US from Europe would be funneled through 13 airports for screening, although he did not name the airports.

Meetings, conferences, conventions and gatherings both large and small have been cancelled in the wake of the virus outbreak.

Many people are justifiably scared of the rapid increase in transmission and the community spread of the virus. Antimicrobial soaps, hand sanitizers as well as cold and flu medications are “flying off the shelves” as shoppers scoop them up just as soon as they’re offered for sale. Those over the age of 65 have been advised to avoid larger crowds such as those found at theaters, concerts, worship services and sporting events. On Thursday, broadway went dark, all major US sporting leagues have suspended their seasons, and Disney Cruise Lines and their theme parks in the US and France are shutting down. Schools, colleges and universities throughout the nation have cancelled traditional classes in favor of online learning. Many corporations (ironically including Boeing) have instructed employees to avoid all non-essential travel through the end of April and any number of meetings, conferences and conventions have been cancelled across the nation. This, coupled with individual reluctance to travel, has put the industry in free fall. So, let’s take a look at how this has adversely affected the larger US carriers.

Travel demand has plummeted, forcing American to reduce capacity.

On March 12 #AmericanAir announced major cuts to its European schedules following slumping demand and new travel restrictions. It now intends to reduce summer capacity on international routes by 34%. The carrier’s transatlantic flying will suffer deep cutbacks with a 50% flight reduction expected to take effect in April. This follows their previously announced 55% reduction in trans-Pacific capacity. The carrier also plans to reduce its domestic capacity in April by approximately 7.5%. “American’s reservations team will contact affected customers directly by email or telephone,” the airline reported. Now, South America has also been added to the reduced capacity list as they’re suspending all service to Argentina beginning next week, although it’s expected to resume on May 7; they also intend to pare back service to Brazil. Flights to Uruguay and Chile were previously suspended through April. This, of course, is in addition to the suspension of flights to mainland China, Hong Kong and South Korea. Flights to Tokyo’s Narita and Haneda Airports from Los Angeles and Dallas will be operated with smaller wide body aircraft beginning in May. The AA Web site says American Airlines “is in close contact with U.S. and international authorities, as well as public health officials, and continues to coordinate with them on all required health and safety related measures regarding COVID-19, or coronavirus.” CEO Doug Parker said the airline has $7.3 billion in available capital and was eyeing cost savings such as reduced pilot training classes. This week the carrier also announced they will extend change fee waivers for customers with travel plans through April 30, regardless of when the ticket was purchased.

Following the fogging process, Delta workers will clean cabin surfaces, including lavatories, setback screens and tray tables.

#Delta is cutting domestic capacity by 10 to 15% and international by 20 to 25%. It’s also put a hiring freeze in place across all levels of the company, offering voluntary leave options to staff, parking some planes, and looking at early retirement of older aircraft. “In the weeks since COVID-19 emerged, Delta people have risen to the challenge, taking every possible action to take care of and protect our customers during a stressful time, “ said CEO Ed Bastian in a Tuesday statement. He reported that decline in demand has resulted in their taking decisive action to protect Delta’s financial position. The carrier will defer $500 million in capital expenditures, delay $500 million of voluntary pension funding and suspend share repurchases. Delta has also recently expanded their cleaning process to include a fogging procedure that uses a safe, high-grade EPA-registered disinfectant, although they did not reveal how often this procedure is followed for each of their aircraft. On Monday they announced that travelers holding tickets to any destination in March or April could change or cancel their tickets without paying a hefty change fee no matter when they bought their tickets. Tickets may be changed once to an alternate itinerary but must be re-issued on or before February 28 of next year.

Southwest says it spends more than 6 hours cleaning every aircraft every night using an EPA-approved, hospital-grade disinfectant.

#SouthwestAir CEO Gary Kelly told his employees that he will take a 10% pay cut as the company faces its worst downturn in decades as a result of the virus, according to the Wall Street Journal. He said the situation was resulting in a “financial crisis” for the carrier and a “severe recession” for the airline industry, the report mentioned. Southwest expects a $300 million hit to its first quarter operating revenue. The airline became the largest domestic carrier in the US in 2003 and maintains that ranking based on the US Department of Transportation’s most recent reporting of domestic originating passengers boarded. With this in mind and, coupled with Kelly’s statements, it’s difficult to fathom why Southwest has not cancelled or suspended any flights or routes due to the current situation. Its Web site states, “At Southwest, the safety of our customers and employees is our uncompromising priority, and we are closely monitoring the coronavirus (COVID-19). We are engaging daily with medical professionals, the Centers for Disease Control (CDC), the World Health Organization (WHO) and other government agencies as the situation evolves.” The airline has never charged customers a fee to change or cancel their flight and allots the funds to future travel as long as the cancellation occurs atleast 10 minutes prior to the scheduled departure. That’s a very liberal and much-appreciated policy.

The air and aircraft surfaces will undergo additional disinfection for United international arrivals into their hub cities.

#United Airlines plans to cut flight capacity 10% domestically and 20% internationally in April following weak demand since the virus’ outbreak. US domestic bookings are down 70% from this time last year while Europe and Asia bookings have all but disappeared. United also plans to cancel flights on a rolling 90-day basis until demand recovers. The airline is reducing its $4.5 billion capital expenditures budget for the year and has suspended its share buyback program. Chief Executive Oscar Munoz and United President Scott Kirby announced on Tuesday they will forgo their base salaries, effective immediately through June 30 this year. The carrier has also withdrawn its first-quarter guidance and now expects to incur a loss. The airline, like its competitors, wants to reassure travelers and claims “aircraft are equipped with state-of-the-art-circulation systems, similar to those found in hospitals, which use a high-efficiency (HEPA) filter to circulate the air and removes up to 99.7% of airborne particles.” Flight attendants in all cabins are now wearing gloves during food and beverage service as well as during clean up. The carrier will soon begin to use an electrostatic fogger to disinfect the air and surfaces within the cabin on all international arrivals into their US hub cities. Like American and Delta, United is waiving change fees on all tickets that were issued on or before March 2, whether domestic or international, for travel from March 10 through April 30. The new ticket can be issued up to one year from the date it was originally purchased.

The International Air Transport Association (IATA) has said the world’s airlines could suffer a loss of $113 billion as a result of COVID-19, following a recent review of its previous financial impact analysis. The Association has called for the rules governing the use of airport slots to be suspended immediately and throughout 2020 due to the impact the spread of the virus has had on airline operations.

This outbreak’s wreaking havoc on the industry as fliers scramble to cancel their travel plans. We’ve got a trip to France scheduled for early May and, right now, we're probably going to wait it out for a few more weeks. What about you? Have your travel plans changed lately and are you avoiding any large gatherings that haven't already been cancelled? Please let me know.

Until next time…stay safe.