Coronavirus (Covid-19) Executive Briefing
Understanding the economic impact of the Covid-19 pandemic and the implications for the travel and tourism sector
- ECONOMIC IMPACT -
Economists and institutions have cut their forecasts and experts are predicting the potential onset of recessionary environments.
In the short-term, unemployment rates will rise in all major economies. The International Labour Organization estimates 6.7% of worldwide working hours will be wiped out in Q2 2020.
The World Travel and Tourism Council (WTTC) estimates job losses of 100.8 million in the travel and tourism industry.
IMF forecasts the global economy will contract by 3% in 2020. Economic growth in US and Europe forecasted to plunge by 9.1% and 5.8% respectively.
Impact of Covid-19 on asset prices
- SECTOR IMPACT: TRAVEL & TOURISM -
As of 2 June 2020
decrease in passenger traffic
Airports Council International (ACI) World announced that worldwide passenger traffic decreased by 55.9% in March 2020, compared to last year.
Airlines industry impact
IATA’s estimate of lost airline revenue for 2020 now stands at $314bn, a 55% reduction compared to last year.
International air travel impact
GlobalData predicts international travel to France, the most-visited country in the world, will fall by 41% and the US will see arrivals fall by 47%. Similar falls in visitation are forecast in many countries.
Key aviation market developments
Delta’s Q1 revenues plunged 18% to $8.6bn and CEO Ed Bastian said Q2 revenue would likely fall 90% from the same period of 2019. Net loss was $534m and it is burning through $100m of cash per day. American Airlines’ results were even more disastrous. It posted a $2.2bn net loss. Even excluding special items, the loss was $1.1bn, worse than the $808m loss forecast by analysts. Like Delta, American warned that Q2 will be worse, predicting it will lose $70m a day over that period. Accor's Q1 results paint a similar picture. Consolidated revenue totalled €768m (US$829.3m), which was down 17% as reported and 15.8% like-for-like. Revenue per available room fell 25.4%. IHG anticipates similar results.
British Airways has put 12,000 jobs at risk, while Ryanair and TUI have warned of the potential for 3,000 and 8,000 job losses respectively. On May 28, easyJet announced that it could cut up to 30% of its workforce.
Sector-specific stimulus programmes
The US has provided support for aviation and lodging. The use of loans, however, could check airlines' recovery. Air France-KLM has secured €9bn ($9.7bn) from the Dutch and French governments and Lufthansa announced on May 25 that it will receive the same amount from the German Government. The deal, which still requires approval from the European Commission, will see the government take a 20% stake in the firm. In the UK, several companies are accessing the Covid Corporate Financing Facility (CCFF). easyJet has borrowed £600m and IHG has issued £600m in commercial paper under this facility.
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