US airline execs warn coronavirus impact 'could be worse than 9/11' downturn
U.S. airlines large and small are seeing a dramatic drop in travel demand that, in the words of one senior executive, "could be worse than 9/11."
JetBlue Airways and United Airlines have already slashed domestic schedules by up to a fifth amid a drop in demand attributed to fears of the spreading COVID-19 coronavirus outbreak. Southwest Airlines, while not yet cutting capacity, anticipates an up to $300 million drop in revenues during the quarter ending in March.
For airlines, one of the most challenge aspects of the virus-related slump in demand is that it’s being driven more by a fear of travel than by woes in the economy.
“Sept. 11 wasn’t an economically driven issue for travel, it was more fear quite frankly and I think that’s what’s manifested this time,” Southwest CEO Gary Kelly said to CNBC on the sidelines of the U.S. Chamber of Commerce Aviation Summit in Washington on Thursday. “I think there’s elements of both but it has a 9/11-type feel. Hopefully, we’ll get this behind us quickly.”
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Kelly wasn’t the only airline executive to express such sentiments at the event.
"In terms of the volumes, this could be worse than 9/11," another senior airline executive told TPG on the sidelines of the same event.
Airline passenger traffic in the U.S. fell by over 30% to 44 million in October 2001 compared to August of that year, according to U.S. Bureau of Transportation Statistics data. While as much as 10% of that can be attributed to the seasonal decline from summer to fall, that still represents more than 12 million fewer people flying in the month immediately following the 9/11 tragedy.
After the attacks, U.S airlines slashed schedules. For example, American Airlines only resumed about 80% of the flights it operated before 9/11 in the months after.
United, which cut global capacity by up to 25%, parked nearly 100 of its older Boeing 727 and 737 jets.
Related: Could the coronavirus end the decade-long U.S. airline expansion?
Now, with the emerging COVID-19 outbreak, the current drop in passenger volume in the U.S. has come on nearly as quickly as cases have spiked here. In just over a week, the number of confirmed cases jumped to 99 as of noon on Thursday, up from 14 on Feb. 23, according to the Centers for Disease Control (CDC). Eleven people in the U.S. have died from the disease to date.
"It wasn’t until about a week ago that we saw a drop in our bookings year-over-year," said Kelly at the summit. "It’s manifested quickly.”
Kelly reiterated that the slowdown in passenger demand is not driven by economics, as it was after the 2008 recession, but rather by fear of the virus.
"We could discount prices and it wouldn't do any good," he said.
Related: A guide to traveling during the coronavirus outbreak
Bill Franke, managing partner and founder of the Indigo Partners group that owns Frontier Airlines, echoed Kelly at the summit saying discounted tickets "aren’t attracting the customers the way they did historically." Indigo previously owned Spirit Airlines.
"There is a lot of anxiety, a lot of discussion right now," said Alaska Airlines CEO Brad Tilden at the summit. The carrier has updated inflight procedures to reduce the possibility of transmission but has still seen bookings drop.
Alaska faces an added challenge of its Seattle base. The metropolitan area is the largest hotspot for COVID-19 cases in the U.S. to date, with major corporations including Amazon and Boeing curtailing all business travel for the time being.
The airline will "probably" have an announcement on capacity "soon," said Tilden in his comments on Alaska's reaction to the outbreak.
Related: Coronavirus flight waivers and changes
American Airlines CEO Doug Parker, who also spoke at the summit, did not comment on any coming responses to the COVID-19 outbreak from the carrier.
"We’re making sure we’re doing everything we can to make sure our team is safe and our customers are safe," said Parker who cited American's previous schedule reductions to Asia and Italy.
On Thursday, industry body the International Air Transport Association (IATA) estimated that COVID-19 could cut passenger numbers by up 10% in the U.S. and Canada. This drop could cost airlines in the region roughly $21 billion in revenues.
"The U.S. airlines... are well positioned to weather demand headwinds and these proactive steps are likely to help," wrote Raymond James analyst Savanthi Syth in a report late on Wednesday. The "proactive steps" she referred to were JetBlue and United's schedule cuts.
Related: United Airlines slashes schedules by up to 20% amid coronavirus slowdown
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- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
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| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
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You may be eligible for as high as 100,000 Membership Rewards® Points after spending $6,000 in eligible purchases on your new Card in your first 6 months of Membership. Welcome offers vary and you may not be eligible for an offer.As High As 100,000 points. Find Out Your Offer.Annual Fee
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Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.