Coronavirus outbreak could cost airlines billions

DALLAS - The new coronavirus seems to be making the travel industry sick.

Southwest Airlines has warned investors of anticipated losses up to $300 million during the first quarter, as passengers -- leisure and business -- are canceling reservations.

Concerns over the coronavirus outbreak, which hasn't reached a peak in the U.S., but with government restrictions on international flights, and many changing their minds about flying carriers like Southwest right now, the coronavirus is causing turbulence for the nation’s airlines.

The International Air Transport Association said carriers around the world could lose between $63 billion and $113 billion in passenger revenues this year because of the scare.

“You see, people are getting scared and rebooking flights,” said Danielle Zanzalari, who is associate professor of business at UNT Dallas.

Wednesday, airline executives met with President Donald Trump and the coronavirus task force.

Some carriers have started adopting Southwest Airlines’ policy of not charging fees if you change a flight.

“Actually, just today, American Airlines has announced that if you book a flight for the next year, you can actually change for free within this next month. Delta has just done that,” Zanzalari said. “A company like Southwest is going to have a lot more problems now, competing, because other airlines are going to the free change fees.”

Dallas-based Southwest Airlines alerted investors that the coronavirus outbreak will cost the carrier up to $300 million during the first quarter, citing significant decline in customer demand and an increase in trip cancellations because of coronavirus concerns.

“Southwest is a regional carrier, so if people can substitute mass transit, which is a little bit scarier with this coronavirus, going on for driving, they're more likely to do that and there more likely to do that for an airline like Southwest,” Zanzalari explained.

Southwest and all major carriers saw stocks deeply drop Thursday.

United Airlines cut its flight schedule, and imposed a hiring freeze, asking employees to take unpaid leave.

“I think mass transit is definitely the biggest concern here, because as you know, with the coronavirus you cannot feel symptoms for a while and still be sort of contagious, and so mass transit is sort of like an incubator for this,” Zanzalari said. “So you’re going to see still this downward trend in the airline industry.”

Zanzalari expects ticket prices to drop at some point, though it may not be as much as initially thought, as airline stock prices have plummeted.

Airlines are worried coronavirus concerned customers won't want to confine themselves in planes with others.