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TECH TALK BY JOHN PAWLICKI | OPM RESEARCH CORONAVIRUS AND AVIATION


THE FAST-MOVING CORONAVIRUS (COVID-19) HAS QUICKLY SPREAD OUT OF CHINA TO OTHER COUNTRIES, INCLUDING THE USA, AND IN ITS WAKE IS CREATING AN INCREDIBLE AMOUNT OF HAVOC. CONSIDERABLE MEDIA ATTENTION HAS BEEN PAID TO CRUISE SHIPS WHICH WERE NOT ALLOWED TO DOCK IN MANY COUNTRIES DUE TO FEAR OF POSSIBLE SPREADING OF THE PANDEMIC, AND THIS HAS SPREAD TO THE AVIATION INDUSTRY AS WELL.


By February, many American and European airlines had either canceled or reduced the number of flights to China, and now to other affected countries such as South Korea, Iran, and Italy. At the time of writing for this article, most nations had instituted policies on accepting foreign visitors and testing passengers disembarking. More than 200,000 flights have already been canceled due to this crisis within or to/from China. The financial impact on the Asia-Pacific region, which is the largest market for both passenger travel and air cargo globally but ranks well behind North America in terms of profitability, will not be known for some time.


THE IMPACT UPON AIR TRAVEL In late February, IATA (International Air Transport Association) had released an initial assessment of the effect of COVID-19 and estimated that the global revenue loss within the aviation industry of $27.8 billion by the end of 2020. Expect further revisions as this situation is dynamic, and the traveling public and business travelers may choose to curtail air travel for a longer time to specific regions, especially if countries institute more significant restrictions (e.g., if you cough, you may not be able to board an aircraft without some degree of testing). An excerpt from this release “shows a potential 13% full-year loss of passenger demand for carriers in the


6 DOMmagazine.com | apr 2020


Asia-Pacific region. Considering that growth for the region’s airlines was forecast to be 4.8%, the net impact will be an 8.2% full-year contraction compared to 2019 demand levels. In this scenario, that would translate into a $27.8 billion revenue loss in 2020 for carriers in the Asia-Pacific region—the bulk of which would be borne by carriers registered in China, with $12.8 billion lost in the China domestic market alone.” Their report also states this assessment assumes that the center of the public health emergency remains in China (although the virus has already spread further since that time), thus creating a more significant impact upon airlines and operators from other parts of the world. Concentrating on the U.S., if this


virus spreads and continues more extended, it may affect the plans of the traveling public and business travel in a meaningful way. Through 2019, U.S. airlines experienced their 10th consecutive year of profitability, but their stock prices have already experienced a downturn as investors have an uneasiness about the impact of the outbreak on demand. This ‘streak of profitability’ may be at risk unless the virus is contained before long. The three largest U.S. carriers


servicing China, Delta Air Lines, United Airlines, and American Airlines, have stopped flying to and from mainland China. Flights to neighboring countries, specifically South Korea, have also been reduced.


Due to the outbreak in Italy, a number of flights have been canceled here as well. Airlines are already eliminating change and cancel fees to assist passengers and to stimulate some travel demand by reducing risk if the coronavirus spreads further. A Korean Air flight attendant


who worked on flights out of Los Angeles International Airport has been diagnosed in South Korea with the coronavirus, according to reports in South Korean media. The Los Angeles County Department of Public Health released a statement saying the flight attendant was not symptomatic during her time in L.A. County and did not post any risk to others while in Los Angeles. The flight attendant reportedly


serviced flights between Seoul and LAX on Feb. 19 and 20. According to South Korea’s Center for Disease Control, the flight attendant had also worked on a flight from Tel Aviv, Israel, to Seoul on February 15. The flight attendant, described as being in her 20’s, was later confirmed positive for the virus, and she is currently in hospital (in February). Other Korean Air crew members on the same flights with her have self- quarantined for 14 days.


GOVERNMENTS TAKING ACTION The potential for governments to be politically forced to react more stringently to assuage public perception should not be underrated.


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