The novel coronavirus outbreak, which originated in the Wuhan City of China, has now become a global headache. So far, the pandemic has claimed more than 8,900 lives and infected more than 200,000 people in 160 countries. But it’s not just individuals who are infected with the virus, businesses have been facing tremendous losses. The airline industry is the worst affected among businesses.
Fearing the closure of airlines and in an attempt to safeguard the industry, India is recently planning a rescue package about $1.6bn for the aviation industry. According to sources cited in a Reuters report, The Finance Ministry is considering a proposal including temporary suspension of taxes levied on the sector.
The coronavirus has triggered fears of a global recession forcing emergency lockdowns and injections of cash since World War Two. Nearly 25 million jobs could be lost worldwide due to the coronavirus pandemic, according to UN estimates. The travel and aviation industries are one of the largest industries in the world, with more than six trillion in revenue. They are responsible for an estimated 319mn direct and indirect jobs. The industry has already been taking huge hits due to travel restrictions by companies and individuals have also canceled on their business and pleasure trip, due to the fear of the virus. Some experts are even saying that this could be the worst crisis for the industry since the 9/11 attacks on the World Trade Center, New York. But all this is just the beginning.
Governments world over are trying to rescue airlines that have been forced to ground planes and cut jobs as travel bans by countries have put the movement at a halt. According to the International Air Transport Association (IATA) estimates airlines may need a bailout of more than $200 billion. In the United States, The Trump administration sought approval from Congress for $50 billion in secured loans to U.S. airlines addressing the financial impact during the crisis.
In India, Vistara and GoAir have suspended their international operations while the country’s biggest carrier has canceled several of its overseas flights. Global aviation consultancy CAPA’s India unit predicted that regardless of any fiscal concessions and government support, most airlines will have to shrink their operations and the more vulnerable carriers may shut down. CAPA estimates that Indian airlines, excluding Air India, might report losses of up to $600 million in the first quarter of 2020, which can turn worse if demands continue to fall.
Airlines across the globe are resorting to salary cuts, job cuts amidst grounded aircraft, and almost a complete stop on travel. Last week British Airways had put out their statement related to possible job cuts considering that they have had to ground their flights ‘like never before’. In a memo to their employees suitably titled – “The Survival of British Airways”, the company chief Alex Cruz signaled at “short term, perhaps the long term” job cuts in response to keeping the airlines afloat in response to the crisis presented by the coronavirus. United Airlines has also informed its employees through an official mail to expect job cuts.
Ryanair, Norwegian Air have all hinted at job cuts, pay cuts to tide over the crisis that has led to sealed borders, a complete halt on the business travel, and a break on peak season leisure travel. Earlier, Norwegian Air had mentioned cancellation of over 4000 flights. In one of their communications to the employees Delta chief, Ed Bastian had mentioned – “The speed of the demand fall-off is unlike anything we’ve seen,” and mentioned the need to ground over 300 aircraft to reduce spending. At the beginning of the crisis unfolding, in the first week of February 2020, there were reports that Cathay Pacific had asked over 20000 employees to proceed on unpaid leave. Within a month of that announcement, it seems the complete aviation industry is headed for a deep dive.
GoAir recently announced that it has terminated contracts of ex-pat pilots amid curtailed operations due to the pandemic. It has cited the “unprecedented” decline in air travel for suspending international operations and offering leave without pay program for its staff on a rotational basis. IndiGo has also announced that it will cut salaries of senior employees. IndiGo CEO Ronojoy Dutta, will himself take a 25% cut in salary, and senior vice presidents and above are taking a 20% pay cut while vice presidents and cockpit crew are taking a 15% pay cut.
Other than the aviation and travel industries, the virus is having a widespread effect on the global economy. There has been a steep plunge in financial markets and the resulting wealth destruction, the disruption of global supply chains for manufacturers and retailers around the globe, the drop in energy prices and production due to reduced consumption All those things could combine with the hit to the travel industry to bring about a global recession.
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