Conserving cash is now essential, argues Ian Taylor
The Covid-19 public health emergency poses an unprecedented challenge for the travel industry. The worst public health crisis in a generation means the worst in the era of mass travel.
The pace of events can render any firm declaration of policy irrelevant within days or hours. A ‘lockdown’ across northern Italy on Monday morning became country-wide by the same evening.
Disney was still operating Disneyland Paris on Thursday morning despite reports that several staff had tested positive for the virus. By Friday morning, the site was closing.
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The World Health Organisation declared Covid-19 a pandemic on Wednesday. On Thursday, Europeans awoke to a ban on travel to the US from most of Europe – the border-free Schengen zone.
Airlines continue to slash capacity – Lufthansa led the way with a 50% cut. Among cruise lines, Carnival-owned Princess Cruises has gone so far as to cancel all sailings.
In the circumstances, a cautious response informed by a ‘safety first’ ethic seems essential. Messages to ‘carry on regardless’ or ‘travel on’ are ill-advised at best and risk a backlash or worse.
‘This is not seasonal flu’
The UK prime minister’s statement on coronavirus on March 12 appeared broadly sensible, as did the contributions of the government’s chief scientific adviser and chief medical officer.
Boris Johnson dismissed the idea the coronavirus might be compared to seasonal flu and warned: “Covid-19 will continue to spread across the world. The number of cases will rise sharply.
“The true number of cases is higher – perhaps much higher – than the number we have so far confirmed.”
The UK government strategy now is to delay the spread and “delay the peak even by a few weeks” until warmer weather and a decline in winter flu frees up more hospital beds for those made severely ill by Covid-19.
Johnson made two key points on the likely duration of the crisis: “The most dangerous period is some weeks away [and] we can act to stretch the peak of the disease over a longer period.”
Any business leader hoping for an early resolution had better think again. This is set to become worse and extend at least into May and probably June before any sign of improvement.
Easter will have to be largely written off – a sharp reversal from the forecast barely 10 days ago by Ryanair chief Michael O’Leary that bookings for the Easter fortnight would be about 10% down.
UK out of step with Europe?
It is worth noting more of the UK government’s approach and the thinking behind it, not least as this seems out of step with other countries in Europe.
Johnson spelled out two immediate impacts on UK outbound travel with a halt to all international school trips and advice not to cruise to those aged 70 and over or with underlying health conditions.
Yet the government refrained from closing schools and banning major sporting events, based on scientific advice that this would have “no significant impact”.
The prime minister noted this may change because of “the burden events place on public services”, but the government was itself overtaken by events on Friday when football authorities across Europe postponed all matches until at least April.
Johnson concluded with a warning: “There is no doubt this will cause significant disruption across the country for many months.”
Chief scientific advisor Sir Patrick Valance noted of the UK: “We are about four weeks behind Italy and other countries in Europe. [But] we can’t stop everybody getting it [the virus].”
For most, this will mean “five days of fairly mild respiratory symptoms”. But “a minority will suffer a severe immune reaction”.
The issue is how to protect the elderly and vulnerable, and both delay and lower the peak of the epidemic.
Chief medical officer for England Professor Chris Whitty advised anyone with “a continuous cough that is new” to stay at home for seven days.
He noted transmission of the virus seems to be “at the maximum in the first day and first few days [of symptoms” and then decline “rapidly”.
On average, he said: “One person will infect two or three others [and] most transfer will tend to be to those close to you.” Hence, the decision for now not to shut everything down.
Whitty also noted: “The overall fatality rate is 1% or lower, but higher among the older.”
The chief scientific advisor confirmed the government considered stopping travel, saying: “We looked at stopping flights quite early. But unless you can stop 95% [of flights] the effect on delay is just a day or two.
“It really was not going to make a big difference. We can’t do it unless everyone [every government] does it.” Crucially, he said: “There would be no point now.”
In response to a question about screening at airports, he noted: “Screening at airports sounds great, but the first case [of Covid-19] in the US went through airport screening and did not show.”
Unprecedented crisis
Comparisons with previous crises appear of limited value. A list of 9/11, the Gulf War, SARS, the financial crash and the ash cloud is trotted out repeatedly.
None of these crises mirrored the scale and impact of coronavirus, although each provided lessons and taken together offer reassurance.
The ash cloud was similar in a limited way in that none foresaw or prepared for it and, for its duration, air travel ceased. But the duration was measured in days and the scale limited to northern Europe.
Covid-19 is of an entirely different order.
The experience of China shows improvement will come. China is in its fourth month of crisis. It spent the first month in denial, then from January took increasingly serious steps to control the outbreak.
By the last week of February, the authorities appeared to be gaining some control of the epidemic. The rate of new infection in China – and therefore among almost one in five of the world’s population – has fallen dramatically.
For now, travel businesses in Europe need to demonstrate the utmost flexibility. This obviously applies to customers, but also towards each other.
Travel agents and tour operators could do with a lot more assistance and information from airlines, for a start.
When advising travellers, companies should assume nothing – from the status of flights to Foreign Office advice on travel. The UK Foreign Office abruptly advised against all but essential travel to Madrid on Friday.
But the crisis has moved beyond providing accurate information and assistance, although this remains essential. Businesses need to survive and therefore to conserve cash.
We must assume the current situation – with outbound bookings down 60% or more in the UK last week, 75% down in Germany and 80% down in cruise – will intensify and last at least till June.
A recession is inevitable, as are company failures.
Whether the recession develops into a severe downturn and failures into a bloodbath depends on how events proceed and the reaction to them.
The UK government and Bank of England announced a raft of measures to help business – especially smaller businesses – this week.
Industry-specific demands – such as to waive Air Passenger Duty – risk appearing self-serving and irrelevant in these circumstances.
No government is going to encourage travel so pleas to remove restrictions are also out of place.
However, governments should be looking to suspend demands for cash and free up lending across the board.
We would all do well to speculate less and prepare more based on the information available from official sources.
Whether we like what we hear is irrelevant. This will be over in a few months. Demand will return. Most of us will be fine. We need to aid those at risk and do what is necessary to be around for the upturn.