The Effects of COVID-19 on the Travel and Accommodation Industries

According to a recent CNBC article, the four largest U.S. airlines combined lost over $10 billion during Q2 2020 due to reduced demand stemming from the COVID-19 pandemic. In that same article, the Transportation Security Administration (TSA) reported that screenings at U.S. airports are currently only 30% of last year's level.

Increasingly, U.S. airlines are encouraging their employees to accept severance packages and depart. At Southwest Airlines, 17,000 employees, or 28% of its workforce either left or else took leaves of absence. An identical number, 17,000, or 20% of Delta Air Lines workforce have also left.

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Delta has already asked its pilots to reduce the minimum number of hours they work by 15%, however, up to 2,500 Delta pilots could be facing furlough this coming fall. Delta has also alerted its cabin crew members that they are overstaffed by an estimated 3,000 workers.

Just this month, United Airlines warned its pilots that in the coming months, it could furlough over one-third of them, and American Airlines is facing furloughing a similar number.

Aircraft manufacturers

Airplane manufacturers and their suppliers are also feeling the effects of COVID-19. Earlier this year, Boeing announced that it would cut 10% of its workforce of 160,000 and that 6,000 of its employees had already left.

COVID-19 has caused the airlines to cancel orders, push back deliveries, or delay payments. Besides COVID, Boeing has also been facing unprecedented challenges. In March 2019, Boeing's 737 Max airplane was grounded worldwide due to two fatal crashes. In June 2020, the plane completed its re-certification flights, and it is expected to be cleared for flight in either September 2020 or later in the year. Boeing currently has around 450 737 Max planes sitting in storage at various facilities. 

Boeing is also just coming off a trade dispute with China that resulted in the suspension of new orders for Boeing's 787 Dreamliner wide-body aircraft. Just this month, the company announced that it would cease making its iconic 747 aircraft in 2022.

Increasingly, airlines are either deferring delivery of new aircraft or else they are insisting that Boeing provide financing. In a July 2020 article in Business Insider, analyst Ken Herbert estimated that "Boeing has incurred $18 billion in costs directly related to the Max crashes and grounding."

On the other side of "the pond", things aren't any different. The Yorkshire Post wrote in a July 2020 article that Airbus booked only 19 orders for aircraft in the April through June period, which is down 88% from the same quarter last year, and down 97% from the second quarter of 2018.

Ohio-based jet engine maker General Electric, which makes engines for both Boeing and Airbus, is cutting 13,000 jobs or one-quarter of its workforce.

In the air and on the sea

The cruise ship industry is faring no better. Outbreaks of COVID-19 on ships have forced passengers to be quarantined in their cabins, and multiple ships have been turned away from ports. On March 14, 2020, the U.S. Centers for Disease Control and Prevention (CDC) issued a no-sail order for cruise ships, essentially shutting down the cruise industry.

Large cruise lines, such as Carnival and Royal Caribbean, have the financial wherewithal to wait out a recovery, but will passengers ever return to cruising? In an August 2020 article, The New York Times quoted Robert Kwortnik, an associate professor at Cornell University's renowned School of Hotel Administration as saying, "The real challenge will be reducing the perceived risk of actually getting on a ship, and this will require changes in operational practices."

The CDC has requested that cruise ships provide laboratory testing for COVID-19 and personal protective equipment. In the New York Times article, Hong-Kong-based Genting Cruise Lines, which owns Crystal Cruises among several other lines, is requiring temperature checks for passengers at boarding, and twice-daily temperature checks for crew members. Both housekeepers and food servers are required to wear masks.

The company is also eliminating self-service food buffets, and it is requiring that all passengers age 70 or older provide a doctor’s note stating that they are fit to travel.

Shipbuilders

German shipbuilder Meyer Werft has been building cruise ships for 225 years. This summer, it halted production for six weeks, and it won't resume work until August 30, 2020. Work on the world's largest cruise ship at the French shipyard Chantiers de l’Atlantique in Saint-Nazaire, France has been delayed.

Royal Caribbean's Wonder of the Seas had been scheduled to enter service from Shanghai in the spring of 2021. The 1180-feet-long (362 mt) ship is slightly larger than its sister ship, Symphony of the Seas, which began service in 2018. Symphony can accommodate over 5,500 passengers and 2,200 crew members.

Royal Caribbean had placed an order with shipbuilder Chantiers de l’Atlantique for an even larger ship that would have been delivered in 2023, however, the status of that order is unknown.

On the ground

Booming home-sharing apps such as Airbnb and VRBO have seen a massive decline in their bookings. Just this month, Airbnb laid off 1,900 employees, or a quarter of its workforce. Soon, listings on Airbnb will indicate whether there has been a 24-hour or a 72-hour waiting period between bookings at individual properties to ensure that the virus has been eliminated from surfaces.

With hotel bookings down to 20% occupancy levels, the Hilton chain is expanding its Digital Key program which allows guests to check in without having to interact with anyone. Hilton is also launching a new global cleanliness program.

Finally, if you've ever stayed at budget hotels and motels, such as Super 8 or Days Inn, you know that many of them eschew inside corridors for outside ones. It turns out that with COVID-19, guests increasingly prefer that direct car-to-room path, so for your next trip, you might want to do away with hotels that offer a fluffy bathrobe, complimentary bedroom slippers and a bottle of bubbly in the mini-fridge and instead check into your nearest Motel 6.