Until this week, there was still hope that the commercial impact of coronavirus was limited. Air transport was using the 2003 SARS epidemic as a landmark, which affected 26 countries, killed 774 people and caused a six-month drop in global travel.
But since the first cases were reported in Italy and Iran last weekend, companies around the world have started to cancel events, from Cannes to California, shaking the corporate travel sector.
Airlines, already subject to the large drop in flights to Asia, have been hit particularly hard by the cancellation of corporate flights. On Friday, Lufthansa said it was cutting its short-haul flights by up to 25% due to falling demand. British Airways’ IAG parent company warned that uncertainty meant that it could not provide profit prospects for 2020; his shares declined 8% and declined by a quarter in 10 days.
“If the results had been last Friday, we probably would have given a perspective,” said CEO Willie Walsh. “Asia seems to have stabilized, but there has been a big change since Monday in Italy. We need to understand how this can impact and for how long. Now it is too early to answer. “
Amidst a flurry of deep cleanings at their offices, hundreds of multinational corporations such as BP, BMW, Orange and Estée Lauder have suspended travel to countries with outbreaks of viruses and forced quarantine on any return from those regions. Other companies such as Nestlé and L’Oréal are canceling all international travel for at least a month.
“We are witnessing a slowdown in activity at canceled conferences and events that have a greater impact on premium traffic, which is a critical source of revenue for many network airlines,” said John Strickland, London-based aviation consultant . IAG’s Walsh acknowledged that the companies are introducing restrictive policies, previously observed. Now we need to understand the time horizon of these policies. While Walsh is optimistic about the impact on more IAG players, he is more bearish about the fate of some smaller competitors, arguing that “there is absolutely no doubt that there are airlines out there that can’t survive this.
It will speed up the disappearance of some of the weakest players in the industry. “
Norwegian Air Shuttle has lost almost half of its stock value this week. On Friday, EasyJet froze hiring and reduced investment in an emergency effort to protect profits from weakening passenger demand. Similar moves from Lufthansa and the Dutch airline KLM, part of the Air France-KLM group, were taken earlier this week, as well as to Fraport, the operator of Frankfurt airport, Germany’s largest transportation hub.
The airline’s international commercial agency had previously warned that global air travel demand could drop for the first time in over 10 years, reducing the industry’s revenues by nearly $ 30 billion. But this was based on the impact of coronavirus on Asia before it started to spread more widely. Mark Manduca, Citi’s aviation analyst, wrote that last week’s volatility shouldn’t be surprising. He also noted that further questions exist: will parts of the airspace be closed in the coming weeks? Will the failures increase? Will corporate travel resume their trend? Do companies use this crisis as an opportunity to use technologies to create virtual meetings?
Nearly two thirds of over 400 companies that responded to a flash survey conducted by the Global Business Travel Association said they had canceled at least “some meetings” because of the coronavirus, while a fifth said they had canceled “many” . With over 230 fairs canceled or postponed, according to a survey done in Germany, insurers are facing compensation, even if the amounts are still not “significant”. IHIF, the world’s largest conference on the hospitality industry, due to open 2,400 delegates in Berlin on March 4, was postponed on Friday, while its ITB travel trade event was discussing going ahead with the German authorities.
The Swiss government has taken over the situation by banning all events involving more than 1,000 people, canceling the Geneva Motor Show and the Basel watch fair, while also the Facebook F8 developer conference, scheduled for San José all beginning of May, has been discontinued.
Another consequence of the coronavirus is that face-to-face meetings between customers and colleagues are diminishing. JPMorgan and Google are checking if visitors to their offices have traveled to Asian regions recently and other companies are encouraging employees to bring laptops home on a daily basis.
Shares of the video conferencing company Zoom have risen 45% in the past month, while Alibaba has offered companies affected by the virus a $ 1,000 credit to purchase its cloud computing software. The increase in employees who use phones has led to a deterioration in audio quality in China and South Korea of approximately 10%, according to Spearline’s monitoring of international telephone lines. Its CEO Kevin Buckley warned that Italian telecommunications were also “an area of concern”.