Several pundits were expecting this to happen yesterday. The impact will be devastating to the EU airlines, many of them already hammered by declining traffic. It needs to be mentioned again – airlines cannot divest expenses as quickly as they lose revenues. Shocks like this cannot be weathered easily and quickly eat up any hoarded cash. Even a week would cause tremendous damage. But, a month? This is very serious and clearly a manifest threat to the survival of several EU-based airlines.
We have a model that will help readers comprehend the size of this impact. Using the US DoT T-100 as a source, please use the model below. The latest data is through 3Q19, but there s enough for you to get a sense of what is coming.
Select an airline and see how much traffic they brought into the USA since 2010. The traffic shown is inbound to the USA only (US traffic outbound is a larger amount of people). The volume of people these airlines are going to “lose” revenues from will likely put several into bankruptcy. The USA is a crucial market for most of them. Will the EU offer these airlines support? If not, expect the weakest to go out of business.
The left table shows the gross volumes of passengers. The right table shows where these passengers disembarked (descending order) when entering the USA. Not only are these airlines being hammered, but the cities that depend on the traffic will also see marked declines in business. As, of course, will anyone depending on doing business with the airports. The downstream impact of this bludgeon will hurt a lot of companies and their employees. So it is not just about damage to EU airlines – many US companies may also go out of business.
If there’s one thing Covid-19 has taught us, the global economy is fragile and we humans are far more closely connected than we ever thought. Lots of lessons for all of us. But first, we have to get through this. Together.