In Depth

Airlines in crisis: coronavirus bites hard

The aviation industry is concerned it will not bear the weight of the crisis, and some companies could go bust without government help.

Donald Trump’s ban on most Europeans travelling to the US has deepened a crisis for the aviation industry which has been brewing since the outbreak of coronavirus. Smoe are now appealing to governments for emergency support.

From today, people from the 26 European nations in the Schengen area - the UK and Ireland are not included - are barred from entering the US for a month.

Airline share prices plummeted following the news. Delta and United Airlines dropped by more than 13%, while British Airways’ parent company and Lufthansa both dropped by more than 10%.

“The new flight restrictions to Europe affect around 7,300 flights and two million seats over the 30-day period outlined by the administration,” says The Wall Street Journal.

Many flights will be cancelled, but airlines will still have to pay their staff and other fixed costs.  

“This crisis is going to be grim,” said Jon Horne, president of the European Cockpit Association, which represents more than 40,000 European pilots. “It is neither a Gulf war nor Sars, nor 9/11, or the 2008 financial crisis, but all of them together.”

Norwegian Air, which relies more than most on transatlantic travel, was hit hard by the news, cancelling up to 4,000 flights, grounding 40% of its long-haul planes and temporarily laying off half its staff until the end of May.

Explaining the decision, Jacob Schram, chief executive of Norwegian - which will continue to operate flights between the US and London - said the White House’s unilateral travel ban put “extra pressure on an already difficult situation”, and led the calls for governmental aid.

It was crucial, he said, that “international governments… act now to ensure that the aviation industry can protect jobs and continue to be a vital part of the global economic recovery”.

The discount airline has benefitted from years of expansion fuelled by large-scale borrowing, and its debt makes it vulnerable - but it is far from the only flight operator in difficulty. Earlier this month Flybe went into administration after coronavirus exascerbated existing financial difficulties.

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Thomas Reynaert, managing director at Airlines for Europe, the trade body that represents airlines including Lufthansa and Air France-KLM, asked governments and the EU to delay new aviation taxes that are due to be implemented and change the rules that govern carriers’ obligations to compensate passengers.

“It is also vital that any national measures proposed by countries to support their national industries do not undermine the competitiveness of European airlines or otherwise disadvantage EU aviation,” Reynaert added.

Before the ban, the coronavirus outbreak was already estimated to have had an £88bn impact on the industry. Bookings were already down by 70% - but now many fear, the BBC says, the “financial loss could grow substantially.”

Many airlines are promosing passengers they can cancel or change the date of their flights at no cost to encourage bookings.

“The broader travel and leisure sector was also hit hard on Thursday, as the scale of disruption to the busy summer season for tour operators and hotels deepened,” The Financial Times reports. “The index tracking travel and leisure shares on the Europe-wide Stoxx 600 fell 8 per cent, leaving it down 36 per cent this year.”

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