Watch CBS News

Coronavirus could cost airlines more than $100 billion this year

Flights canceled over coronavirus outbreak
Airports suspend flights as coronavirus raises concern for travelers 01:54

Although the global coronavirus outbreak has yet to seriously damage the wider U.S. economy, it's bearing down fast on the airline industry. 

Travelers are booking fewer flights, analysts say, hurting sales at JetBlue Airways, Southwest Airlines, United Airlines and other carriers. A continued decline as the virus spreads could cost domestic airlines a total of $21 billion in lost revenue this year, according to an estimate from the International Air Transport Association. The industry globally could lose up to $113 billion this year, the association said. 

"We are seeing cancellations, especially among corporate travelers," said Helane Becker, an airline analyst at Cowen. "What we are not seeing is future bookings, especially for April. Most people seem to be taking a wait-and-see approach."

Southwest said in a government filing that it expects to lose between $200 million and $300 million amid passenger concerns about coronavirus. 

"We could discount prices tomorrow and it wouldn't do any good," Co-Chief Executive Gary Kelly said this week at an aviation conference in Washington, D.C. 

Doctor on coronavirus facts and precautions 01:37

United said this week it will reduce flights, freeze hiring and ask employees to volunteer for unpaid leave for up to six months as the airline struggles with weak demand for travel. Starting in April, the company will reduce its passenger-carrying capacity by 20% on international flights and 10% in the U.S. — the first airline to cut domestic flights in response to the decrease in demand caused by the virus. United officials also said they will temporarily ground an unspecified number of planes.

"We sincerely hope that these latest measures are enough, but the dynamic nature of this outbreak requires us to be nimble and flexible moving forward in how we respond," United CEO Oscar Munoz said in an email to employees. 

JetBlue is reducing its number of daily flights by 5%, considering voluntary time-off programs for workers and slowing its hiring, according to an email the airline president Joanna Geraghty sent to staff this week. The airline also announced last month it will suspend change-and-cancellation fees on flights until June.  

"The good news is that we have a solid balance sheet to help us weather this storm," Geraghty said in the email.

Airlines are also taking a hit from the suspension of flights to Asia. Delta Airlines said last month it is temporarily reducing weekly flights to China to 21, from 42, due to "significantly reduced customer demand." 

Breaking down coronavirus' impact on the U.S. economy 04:29

Industry observers say they don't expect coronavirus fears to bankrupt U.S. airlines. Still. the longer it takes for health officials to contain the outbreak, the longer it will take for airlines to recover financially, they said. 

"There are lots of airlines that have got relatively narrow profit margins and lots of debt," IATA's chief economist Brian Pearce said during a press event in Singapore. "A cash-flow shock like this could certainly send some into a very difficult situation." 

Cowen analysts said in a report that they expect decreased ticket sales to continue into June. But they note that "if this extends through the end of the year, all bets are off."

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.