US airlines facing daunting challenges

The global coronavirus outbreak is pressuring the US airline industry with widespread flight cancellations as the US government restricts travel, and businesses and consumers grow cautious about flying.

"As a result of COVID-19, we are currently seeing an approximately 100 percent decline in near-term demand to China and an approximately 75 percent decline in near-term demand on the rest of our trans-Pacific routes," United Airlines said in a statement last week.

Major US airlines, which have been halting flights between China and the US since February, are now grounding more flights to and from some other Asian countries and Italy — areas that have been most affected by the outbreak.

Last week, the US Centers for Disease Control and Prevention elevated its travel advisory to South Korea, Italy and Iran to Level 3, its highest rating — advising all travelers to avoid "all nonessential travel" to those destinations — and Japan to Level 2.

In a Monday news briefing, the head of the World Health Organization (WHO) called the four countries WHO's "greatest concern" in terms of the outbreak.

By contrast, US President Donald Trump, at a White House meeting Wednesday with airline executives, sought to tamp down any concerns over air travel, telling the public, "It's safe to fly. And large portions of the world are very safe to fly, so we don't want to say anything other than that."

American Airlines, Delta Air Lines and United are all reducing flights to South Korea or halting them altogether.

JetBlue Airways and United announced Wednesday temporary reductions in their domestic flight schedules, as well.

United is also decreasing service to Japan, Singapore and Taiwan. The company said that flights from and to the Chinese mainland and Hong Kong account for approximately 5 percent of its 2020 planned capacity, with other trans-Pacific routes representing an additional 10 percent.

While United is yet to adjust its flights to Italy, Delta announced on Monday it was grounding daily flights between New York and Milan, Italy, until early May and has postponed its seasonal service between New York and Venice.

American decided last week to suspend operations between Milan and New York and Miami until late April, citing a reduction in demand.

Alaska Airlines, American, Delta, JetBlue and United have all said in recent days that they would waive change fees for flights booked for the coming weeks.

Research by Vertical Research Partners indicated that airline ticket sales at US travel agencies last week were down 9.4 percent in dollar terms compared with the same period last year, with trip cancellations 21 percent higher year-over-year.

Airline ticket sales are being heavily affected by businesses changing travel plans.

According to a recent survey by the Global Business Travel Association (GBTA), nearly two thirds of its member companies have canceled "at least a few" meetings or events, and 95 percent have canceled or suspended most or all business trips to China.

Technology giants Amazon and Google have restricted "unnecessary" travel. Microsoft, Google and Facebook are all canceling spring industry conferences, all of which normally draw thousands of attendees annually.

GBTA's survey indicated that more than half of its supplier companies saw coronavirus having a significant to moderate impact on their revenues, among which airlines and hospitality providers are taking the biggest hit. The association expects the outbreak to cost the industry $46.6 billion per month.

The coronavirus "is fundamentally affecting the way many companies are now doing business," said Scott Solombrino, GBTA's chief operating officer and executive director, who added that the outbreak is having a significant and potentially very costly effect on the overall business travel industry.

"If this turns into a global pandemic, the industry may well lose billions of dollars — an impact that will have negative ramifications for the entire global economy," he said.

Airline stocks have underperformed the broader market. On Thursday, American Airlines fell 13.44 percent, United Airlines dropped 13.25 percent and Delta slipped 7.20 percent.