COVID-19 / BUSINESS Bloomberg Businessweek March 16, 202038
CRUISE: SCOTT STRAZZANTE/SAN FRANCISCO CHRONICLE/AP PHOTO. PLANE: PU XIAOXU XINHUA/EYEVINE/REDUXThe cruise industry has
survived torpedoes,
terrorists, incompetent
captains, the winter
vomiting bug, and an
iceberg that doomed a ship
thought to be unsinkable.
Now it may be facing its
toughest obstacle yet.
On March 8, the U.S.
Department of State, in an
unprecedented alert, told
citizens not to take cruises.
Carnival Corp., the industry
leader, saw its share price
tumble to levels not seen
since the Great Recession.Many customers chose to
abandon ship.
“We are definitely
experiencing a high number
of cancellations due to the
virus,” says Kristy Adler,
chief operating officer at
Cruise & Resort Inc., a travel
agency in Sherman Oaks,
Calif. “It’s a very tough time
in our industry right now!”
Cruise takers are a
resilient bunch, but images
of guests trapped o
ships such as theD
Princess—where m
700 contracted theon an Asian voyage—may
scare some off forever. And
Carnival on March 9 got
its first lawsuit regarding
passengers who’d been
stuck with sick guests on
theGrand Princess off the
California coast.
One way Carnival hopes
to keep sailing: offering
$200 onboard credits
to passengers who stick
with their scheduled trips.
on Ch i t h P l i
iamond
ore than
e virus—Christopher Palmerireach 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 theWill cruise passengers return?
ill airlines
gain
ltitude?