Bloomberg Businessweek - USA (2020-03-16)

 COVID-19 / BUSINESS Bloomberg Businessweek March 16, 2020

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CRUISE: SCOTT STRAZZANTE/SAN FRANCISCO CHRONICLE/AP PHOTO. PLANE: PU XIAOXU XINHUA/EYEVINE/REDUX

Thecruiseindustryhas

survivedtorpedoes,

terrorists,incompetent

captains,thewinter

vomitingbug,andan

icebergthatdoomeda ship

thoughttobeunsinkable.

Nowit maybefacingits

toughestobstacleyet.

OnMarch8,theU.S.

DepartmentofState,inan

unprecedentedalert,told

citizensnottotakecruises.

CarnivalCorp.,theindustry

leader,sawitsshareprice

tumbletolevelsnotseen

sincetheGreatRecession.

Manycustomerschoseto

abandonship.

“Wearedefinitely

experiencinga highnumber

ofcancellationsduetothe

virus,”saysKristyAdler,

chiefoperatingofficerat

Cruise& ResortInc.,a travel

agencyinShermanOaks,

Calif.“It’sa verytoughtime

inourindustryrightnow!”

Cruisetakersarea

resilientbunch,butimages

ofgueststrappedo

shipssuchastheD

Princess—wherem

700 contractedthe

onanAsian voyage—may

scaresome off forever. And

Carnival on March 9 got

itsfirst lawsuit regarding

passengers who’d been

stuckwith sick guests on

theGrand Princess off the

California coast.

One way Carnival hopes

tokeep sailing: offering

$200onboard credits

topassengerswhostick

withtheirscheduledtrips.

on Chi t h Pl i

iamond

orethan

evirus

—ChristopherPalmeri

reach of the crisis to an unprecedented

level. The lethal outbreak had been a

multi billion-dollar headache largely for

airlines in China and the rest of Asia until

late February. Since then, the fear of flying has

followed the virus westward, striking some of the

biggest U.S. and European carriers. From Qantas

and Cathay Pacific in Asia, to Lufthansa and Air

France-KLM in Europe, to United and American in

the U.S., airlines all share the common problem of

virus-sapped bookings.

Amid the sudden plunge in global demand,

commercial air traffic is poised to fall 8.9% this

year, according to Jefferies Financial Group Inc.

That would be the biggest decline in the 42 years

of available data stretching back to 1978, dwarfing

the impact of the Sept. 11 terrorist attacks. “The

industry is facing its biggest challenge in modern

aviation history,” says Yu Zhanfu, a partner at con-

sulting firm Roland Berger in Beijing.

As government advisories, travel bans, quaran-

tines, and growing worries about being confined at

30,000 feet for many hours seated next to a possi-

ble virus carrier drain customer demand, airlines

are responding by making massive cuts along their

routes. Lufthansa is cutting its schedule by as much

as 50%. United chopped its April domestic sched-

ule 10% and reduced international flying 20%. Delta

will cut domestic capacity as much as 15% and its

international flights 25%; American will decrease

foreign flights by 10% in the peak summer season.

The virus has already claimed its first casualties

in the industry. Flybe, Britain’s biggest domestic

carrier, was under financial stress before the infec-

tions began spreading, and it finally collapsed on

March 5 as demand dwindled. In China, govern-

ment officials began taking charge of the parent

of Hainan Airlines this month after it fell victim to

the mass travel bans there.

Other governments are likely to step in as well.

among major U.S. metropolitan areas over the

past decade, Austin also saw one of the nation’s

biggest increases in the economic gap between

white and nonwhite populations, according to a

recent Brookings Institution study.

Civic do-gooders are raising funds to support

service workers who stand to take big losses from

the cancellation of the festival. The Austin metro

area has roughly 113,000 workers in the hotel

and food-service sector, census data show. Two

GoFundMe campaigns have generated more than

$27,000 of donations. (The company that runs

SXSW also says it will lay off about a third of its

175 full-time employees.)

The cancellation is particularly hard on

Mudathir Abdulgafar, a full-time ride-share

driver who’s lived in Austin for seven years. He

says business usually doubles during the festival,

and its scrubbing this year will be a blow to his

finances. Abdulgafar had already stopped accept-

ing pooled rides about three weeks ago, figur-

ing the extra passengers on those trips increased

the chance he could catch the coronavirus

and be forced to take time off before the busy

SXSW period.

He’s been talking with other drivers about

what to do, and many of his colleagues are think-

ing about seeking work piloting delivery vans for

Amazon. They figure the job will be steadier, and

there’s less chance of catching an illness from

a rider who is sick. Says Abdulgafar: “Packages

instead of people.” — Brendan Walsh

○ Globalization has been a boon for the airline

industry, which has flourished as nations opened

up to one another over the past 40 years. Now

businesspeople and tourists can crisscross bor-

ders as easily as they travel close to home.

Unfortunately, as the cascade of infections around

the globe can attest, so can the coronavirus.

That frictionless movement has expanded the

Will cruise passengers return?

ill airlines

gain

ltitude?