Lisa HoggView Profile
Although many sectors have felt the effects of the coronavirus (COVID-19), one of the most heavily impacted is the travel industry. With strict social distancing measures implemented across much of the world, tourism, already a competitive industry, is in for an anxious time over the next few months. The crisis has already seen high-profile casualties, so what other effects could coronavirus have on the travel industry?
Grounded – The airline industry
As Thomas Cook’s collapse in September 2019 proved, the airline industry was already tough.
FlyBe was the first of the casualties; already struggling to compete with other low-cost carriers, the drop in bookings proved too much for the airline.
As demand dropped and more countries reported cases of the virus, other airlines began to feel the pinch. Virgin Atlantic even admitted to flying almost empty planes to keep its sought-after slots at major airports. Speaking of, Virgin Australia’s fall into administration proves no company, no matter how recognisable their brand, is safe from potential financial problems.
Even popular low-cost carrier EasyJet has reached out for a government loan, while planning to resume flights with the middle seat empty to adhere to social distancing.
Will the airline industry bounce back after the crisis? Who knows? But with the rate the coronavirus spread across the world, people might become less inclined to travel long-distance or as often as they might have done before the lockdown.
However, Ryanair Chief Executive Michael O’Leary believes flights could be heavily discounted once the pandemic is over:
“Volumes will be back on a normal footing but on lower pricing.
“The minute we’re about to start flying again we’ll start doing seat sales, and so will every other airline.”
Mayday – How cruise liners may suffer from coronavirus
While the airline industry has suffered from a sudden decline, it has been able to continue operating, albeit at a vastly reduced capacity. The cruise line industry, by contrast, has effectively been put on hold. Most ships returned to shore without issue, but there were several high-profile cases in-which passengers contracted coronavirus. The virus spread onboard and meant ships were unable to dock and unload their passengers.
It’s a sector which may have a harder time recovering compared to other parts of the tourism industry; with many operators registering in offshore locations to take advantage of lower taxation and labour costs. Nowadays, however, this means they won’t benefit from bailouts offered by the USA or EU. Coupled with a consensus that cruises actually contribute very little to their destinations’ economies, and the industry may not bounce back as quickly as the airlines.
On the home front
The pandemic has also impacted domestic tourism. The lockdown is taking place in what in any other year would have been a peak time for tourism: The Easter Holidays have been almost a complete write off for businesses which rely on these usually busy times for a lot of their trade. With no definite end to the crisis in sight, Brits are advised not to make travel or holiday plans until social distancing rules are relaxed. Travel insurance firms have even stopped taking on new customers, while others have indicated that existing policies won’t cover coronavirus-related issues.
Additionally, many communities normally reliant on tourism have started discouraging visitors, both to maintain social distancing and keep the rate of infection as low as possible.
Is help available?
Fortunately, help is available for companies struggling from coronavirus-related financial difficulties. The government offers various support schemes, such as the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Job Retention Scheme, and the ability for businesses to claim back Statutory Sick Pay.
The government has also offered deferrals of VAT to help with cash flow, and those struggling to pay their tax bills can also access Time to Pay Arrangements.
Alternatively, or if you’re ineligible for what the government offers, you can still apply for commercial finance, or insolvency procedures if your outgoings outweigh your assets. These procedures could be monthly repayment arrangements to pay off your debts at an affordable rate, or a liquidation process if you would be better off closing the doors.
The coronavirus outbreak has heavily impacted the travel industry worldwide. With social distancing rules in place across many countries, anything other than essential travel has been advised against. Even the biggest names in the airline and cruising industries are finding the going tough as demand plummets, and domestic tourism is suffering too. Help is available from the government for companies struggling through these times, alongside insolvency procedures. If you feel your business could benefit from one of our company closure or recovery arrangements, speak to us today for impartial advice with no obligation. We can help you decide the best way forward, and all initial advice is free.