Airlines will be hit hard by coronavirus

The history of past pandemics augurs badly for the travel industry

Graphic detail

Feb 3rd 2020

STOCKMARKETS IN China fell by nearly 8% on February 3rd—the largest single-day fall

since 2015—as fears about the economic impact of the Wuhan coronavirus increased. Of the
industries affected by the epidemic, perhaps none will be hit as hard as travel. In recent weeks,
hotel occupancy in China has fallen by 45% year-on-year, according to analysts at Citigroup, a
bank. Shares in China’s three biggest airlines—Air China, China Eastern Airlines and China
Southern Airlines—have fallen by more than 20% since the first person died from the new strain,
known as 2019-nCoV, on January 9th. The death toll in China has risen to 361. And the first
death from the strain has been reported abroad, in the Philippines.

Investors in Chinese aviation are right to be nervous. Some previous pandemics have caused
huge drops in airline traffic. From peak to trough, Asian airlines’ monthly passenger numbers
dropped by 35% after the SARS outbreak in 2003; for Cathay Pacific, Hong Kong’s flag carrier,
traffic fell by nearly 80%. The impact on some airlines of the Ebola outbreak, which started in
West Africa in 2014, was still more severe. International air-passenger arrivals in Sierra Leone,
for instance, plunged by 93%.

Compared with previous pandemics, Ebola and SARS hit airlines disproportionately hard.
Passenger air traffic after the start of an outbreak normally goes back to pre-pandemic levels
after 7 to 9 months. But with SARS the trough was much deeper than for other flu outbreaks in
Asia, including MERS, a form of coronavirus that emerged in Saudi Arabia in 2015, as well as
for the Zika virus in Brazil. Worse still was Ebola, which saw a deeper fall in passenger arrivals
and—uniquely—took much longer for those affected to recover.

Tourists and business travellers may think that staying away from affected places is entirely
rational during such outbreaks. But the World Bank estimates that 90% of economic losses
during any outbreak arise from “irrational” efforts of the public to avoid infection in ways that do
no such thing. Tiffany Misrahi of the World Travel & Tourism Council, an international trade
body, notes that Ebola had a catastrophic impact on African tourism, whether or not a country
was host to Ebola infections or not. Tanzania—a country over 3,000 miles from the Ebola
outbreak—never had a single case of the disease, yet saw hotel bookings fall by up to 50% in
October 2014 because of worries about the virus. SARS also had consequences far beyond Asia.
A drop in air travel in North America caused by the outbreak caused a wave of bankruptcies and
consolidation among airlines based there (although these had already been financially weakened
by the recession that followed the 9/11 terrorist attacks).

The travel industry should brace for major disruption as governments impose travel bans on
Chinese visitors to stop the spread of the disease. On February 3rd the United Arab Emirates, one
of the world’s biggest air-travel hubs, said it will suspend flights to and from Chinese
destinations outside Beijing. It is unlikely to be the last to do so.

https://www.economist.com/graphic-detail/2020/02/03/airlines-will-be-hit-hard-by-coronavirus?
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