The US travel industry has gutted because of the pandemic outbreak. US air travel is almost 90% down as compared to last year.
Considering the effect the pandemic has left on the travel industry, economists say it will take years to generate $1.1 trillion – the same amount as last year. The travel sector contributes about 10% in providing jobs to people. With travel at a halt, the economy will struggle to accelerate. The unemployment rate has reached about 50%.
Tori Emerson Barnes, an Executive at the US Travel Association said, “while the rest of the country is moving into a recession, the travel industry is already in a depression.”
US Economy Faces Much Worse Impact Than 9/11
This is not the first time that the US economy has seen a drastic hit. Airports were closed for four days due to the 9/11 terrorist attacks. It took two years for the airline industry to match the same passenger levels. This time it is estimated that the cost is nine times than the damages from 9/11.
The travel industry was once a major contributor to the economy. As many people were traveling for business purposes and some for tourism. According to an estimate, the travel industry will be the last industry to recover.
Gregory Daco, Chief US Economist for Oxford Economics said, “Usually travel would be a good leading indicator of confidence and discretionary spending, but in the walk of the global coronavirus recession, it’s likely to be a lagging indicator.”
US Airlines Losing Profits
US airlines are running out of profits and cutting costs to survive at this time. As many passengers are canceling their flights in the fear, it is causing the airlines to ground their flights. Many airlines have been under the financial crunch since the beginning of lockdown. Which led them to lay off their workforce to a great extent. On average domestic airlines are carrying passengers fewer than 50.
According to data from SITA there has been a decline in the flights about 80% globally, 90% in Europe as compared to last year, and in the US the number of passengers per day has reduced from 2.5 million to 130,000 and 215,000 in the first week of May 2020.
The layoffs will be effective from October 1, as the airlines cannot lay off and make pay cuts of employees until September 30, as directed by the state aid terms. As many airlines have taken a $25 billion bailout from the federal aid and an additional $25 billion in loans.
As the United Airlines CEO Scott Kirby said, “Honestly, we don’t think that will happen until there is a vaccine.”