Airlines around the world on Thursday scrambled to cancel flights, lay off workers and reassure anxious travelers, capping a dizzying period of weeks in which bookings have evaporated and investors have lost confidence in the industry.
The latest frenzy was touched off by President Trump’s announcement on Wednesday that, beginning Friday night, most travelers from 26 European countries would be barred from visiting the United States for 30 days, news that sent airline stocks tumbling. Shares of United Airlines and Delta Air Lines closed down by more than 20 percent, and American Airlines was down about 17 percent. Earlier, shares of the parent company of British Airways closed down 16 percent in London.
Already reeling from a steep decline in bookings because of the coronavirus outbreak, airlines now stand to lose millions of dollars in revenue from a dramatic decline in trans-Atlantic flights, which account for a big chunk of their business.
On Thursday, Norwegian Air, a once fast-growing discount carrier that flies to many American cities, said it would temporarily lay off half of its staff and ground 40 percent of its long-haul flights and 25 percent of shorter flights.
“Suspending travel on such a broad scale will create negative consequences across the economy,” said Alexandre de Juniac, the chief executive of the International Air Transport Association, an industry group. “Governments must recognize this and be ready to support” the industry.
According to the association, last year, about 200,000 flights carried passengers between the United States and the 26 countries targeted in Mr. Trump’s order, averaging about 550 flights carrying 125,000 travelers per day.
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Over the next four weeks, the ban would affect more than 6,700 flights in each direction, according to an analysis by OAG, an aviation data provider. Delta is the airline most affected, operating 17 percent of those flights, according to OAG. United is next, with 14 percent, followed by Lufthansa, with 13 percent. American ranked fourth, operating about 8 percent of the affected flights.
Delta said that once the ban takes effect, it would temporarily suspend flights between Paris and Cincinnati, Indianapolis, Raleigh/Durham and Salt Lake City. The airline will also freeze flights between Amsterdam and Orlando, Portland and Salt Lake City. United said it would continue to fly its existing schedule between the United States and Europe through March 19. After that, it expects to continue serving Amsterdam, Brussels, Frankfurt, Munich, Lisbon, Paris and Zurich.
All three airlines said they would cap fares for flights between Europe and the United States. Delta said on Wednesday night that it would waive change fees for all customers traveling to, from or through Europe and the United Kingdom through May.
For two days, United’s chief executive, Oscar Munoz, has been in Washington, meeting with senior Trump administration officials and members of Congress to discuss the policies they are considering and to explain to them the effect the virus is having on United’s business, Mr. Munoz and United’s president, Scott Kirby, said in a letter to employees on Thursday, which was viewed by The New York Times.
The men also said that Mr. Kirby had been speaking with executives at large companies, including banks, to understand the effect the outbreak is having on the broader economy and that United’s operational and finance teams were developing contingency plans to prepare for the virus’s spread.
Confusion reigned after Mr. Trump’s announcement, with frantic travelers struggling to understand the consequences of the ban, which does not apply to American citizens and permanent residents and their close relatives, and airlines racing to adjust operations on little notice. The airlines would not say publicly whether the White House had notified them of the ban before it was announced.
“This action will hit U.S. airlines, their employees, travelers and the shipping public extremely hard,” said Nicholas Calio, president of Airlines for America, an industry group. “However, we respect the need to take this unprecedented action and appreciate the administration’s commitment to facilitate travel and trade.”
But others in the industry were far more critical. Sara Nelson, the president of the Association of Flight Attendants, the union representing flight attendants at 20 airlines, including United, said in an interview that the airline industry was “pretty blindsided” by Mr. Trump’s announcement.
“It created total pandemonium,” Ms. Nelson said. “Airline employees had no idea what this meant and for some it was completely disrupting their lives. They weren’t even sure if they were going to have a job in the next 24 hours or get home.”
Among flight attendants, there is widespread fear about job losses, she added. “The trajectory that this is on right now is beyond job loss, it’s about whether or not the industry can actually operate,” Ms. Nelson said. “You can’t operate a flight when no one wants to be on it.”
Even before the ban, investors were reassessing the financial prospects of airlines, several of which have sought bankruptcy protection in the last two decades.
“The airlines are in cash preservation mode, and we fully expect to see credit facilities extended and increased in the next week,” Helane Becker, an airline analyst with Cowen, wrote in a research note on Thursday. “We previously stated U.S. airline bankruptcies were unlikely and in the near-term that still remains the case BUT if bookings do not improve in the next three months things could deteriorate quickly.”
United borrowed $2 billion this week, and Delta raised $1 billion last week. American raised $500 million two weeks ago.
Travel and tourism between the United States and Europe, including areas not covered by the ban, is a business totaling roughly $130 billion annually, according to U.S. government data.
Trans-Atlantic flights accounted for about 17 percent of United’s 2019 passenger revenues, or $7.3 billion. For Delta, the share was 15 percent, or $6.3 billion, and for American it was 11 percent, or $4.6 billion.
European airline stocks also fell sharply. And shares of the aircraft manufacturer Boeing, which has also been hurt by the grounding of the 737 Max and cuts in orders, closed down 18 percent on Thursday afternoon after dropping 18 percent on Wednesday.
The chief executive of Norwegian Air, Jacob Schram, said in a statement that Mr. Trump’s travel ban on European visitors “imposed further pressure on an already difficult situation.”
Last week, the International Air Transport Association estimated that the virus could wipe out as much as $113 billion in airline revenue worldwide, a forecast made before Mr. Trump’s latest travel restrictions and other limits by countries including Israel, Kuwait and Spain.
“Airlines will need emergency measures to get through this crisis,” Mr. de Juniac said on Thursday, calling on governments around the world to consider extending credit to airlines or reducing taxes and other costs.
In addition to Mr. Trump’s travel ban affecting the 26 European countries that make up the Schengen Area, the State Department warned Americans that they should reconsider all international travel, the most severe caution it can offer short of “do not travel.”
At an investor conference on Tuesday, the chief executives of Delta, United and American said that years of streamlining operations had prepared them to weather the effects of a crisis like the coronavirus outbreak and experts have said that they are more ready than their global peers.
Yet, United’s president, Mr. Kirby, said at the conference that the company’s net bookings to Europe were already down 100 percent in recent days, about half of that coming from cancellations. The airline, he said, was preparing for its worst-case scenario — a sustained decline in revenue for the rest of the year — even though it didn’t expect that to happen.
“The financial impact of our dire scenario is worse than the post-9/11 decline in demand,” he said. “We, of course, hope that it will be better, but we’re not willing to count on that.”
Natalie Kitroeff contributed reporting.
Source: Economy - nytimes.com
