Brown on Business
July 6-12, 2020
By Wesley Brown
wesley@dailydata.com
COVID-19 causes vacationers to table summer vacation plans
If you are thinking about or planning a vacation this summer by air, land or sea, you may want to rethink those plans because things are getting weird in the travel industry.
On June 25 at the White House, top airline executives met with Vice President Mike Pence and other Trump administration officials to get a glide path forward on how the industry can move forward with traveling the friendly skies again.
According to multiple news reports, Pence met with the top executives from United Airlines, Delta Air Lines, American Airlines, JetBlue Airways, and Southwest Airlines. At that supposed secret meeting, Transportation Secretary Elaine Chao, Centers for Disease Control (CDC) Director Mark Redfield, and Health and Human Services Secretary Alex Azar were also in attendance.
Although the airlines were told not to divulge details of the private meeting, Pence’s office accidentally included it on the vice president’s public schedule. According to a Reuters report based on anonymous sources, the airlines wanted to get a commitment from President Donald Trump on such urgent issues as contact tracing for COVID-19, taking passengers’ temperatures at airports and potential action by the European Union to block U.S. travelers.
To date, however, the Trump administration has not committed to back plans by U.S. airlines to administer temperature checks to all passengers before getting on a crowded airplane.
On Monday, however, Airlines for America (A4A) announced its member carriers would voluntarily implement temporary policies and procedures for passenger travel as additional protection during the pandemic.
Alaska Airlines, American Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, and United Airlines will require passengers to complete a simple health acknowledgment during the check-in process. Those health checks typically cover face coverings, and verifying passengers are not experiencing a high temperature, coughing, difficulty breathing, loss of taste or smell, chills, muscle pain, or a sore throat. The airlines will also make sure passengers have not had close contact with someone who tested positive or had symptoms of COVID-19 in the last two weeks.
“Health assessments prior to air travel are just one more important measure in our multi-layered approach to help mitigate risk and prioritize the wellbeing of passengers and employees,” said A4A President and CEO Nicholas Calio. “We want passengers to know that they should expect to see this added layer of protection the next time they check-in for a flight.”
Calio stressed that carriers are vigorously enforcing face-covering requirements, enhancing cleaning protocols, and adjusting policies to limit onboard interaction. The airline trade group is also encouraging the traveling public to follow all CDC recommendations to protect the public, including frequent hand washing.
But that may not still be enough to get Americans out of their virtual reality hibernation and off their couches and head to the airport, notably after Europe instituted a ban on U.S. travelers on June 30.
Earlier in June, the International Air Transport Association (IATA) released its financial outlook for the global air transport industry showing that airlines will lose $84.3 billion in 2020 for a net profit margin of -20.1%. Revenues will fall 50% to $419 billion from $838 billion in 2019. In 2021, losses are forecasted to decline by $15.8 billion as revenue rises to $598 billion.
“Financially, 2020 will go down as the worst year in the history of aviation. On average, every day of this year will add $230 million to industry losses. In total that is a loss of $84.3 billion. It means that — based on an estimate of 2.2 billion passengers this year — airlines will lose $37.54 per passenger. That is why government financial relief was and remains crucial as airlines burn through cash,” said Alexandre de Juniac, IATA’s Director General and CEO.
Juniac said the key to the aviation industry’s rebound is the universal implementation of the restart measures agreed through the International Civil Aviation Organization (ICAO) to keep passengers and crew safe, much like the recent A4A proposal.
“Provided there is not a second and more damaging wave of COVID-19, the worst of the collapse in traffic is likely behind us,” said Juniac. “That’s an important part of the economic recovery because about 10% of the world’s GDP is from tourism and much of that depends on air travel. Getting people safely flying again will be a powerful economic boost.”
But travelers also are not that interested in heading out to sea. In the face of the impact of the COVID-19 global pandemic, Carnival and other cruise lines paused operations in mid-March and do not expect to be up-and-running soon. Most vacationers have scratched cruises off their travel list after COVID-19 infections left ships out to sea for several weeks, trapping hundreds of sick and dying passengers on board and contributing to the fast spread of the virus in the U.S.
For its part, Carnival posted a $4.4 billion loss in the second quarter, well off Wall Street forecast. Carnival’s cruise line sales also plummeted 85% to $700 million, missing estimates of about $738 million. The industry’s dismal future has also caused big and small investors alike to exit cruise line stocks and seek safer harbors for new cash.
Meanwhile, travelers hoping to pack their families in the car and travel to vacation destinations in Florida, Texas, and other Sunbelt states are halting plans as COVID-19 cases have spiked since most U.S. states began reopening in late May and early June. At the current count, there are more than 21,000 confirmed positive cases in Arkansas and 270 deaths. Nationally, total coronavirus cases at the end of June were nearly 2.7 million, with almost 129,000 deaths.
And even for those who do decide nothing will end their summer vacation, there is good and bad news. The good news is airlines tickets, cruise packages, and vacation resorts are at their lowest level in many years.
However, even in the middle of a global pandemic, the oil industry has not halted its annual pump price run-up ahead of the Fourth of July. Today, the average price for a regular unleaded gallon is $2.17 per gallon, double what motorists were paying in April when crude oil futures collapsed into negative territory.
Average pump prices in Arkansas, which in some areas of the state dropped below one dollar in early April, are now up to $1.90 for a regular unleaded gallon.
To many travelers, that may be enough to keep them at home.
