The COVID-19 pandemic has had a drastic effect on all business sectors as governments worldwide have adopted various measures to mitigate the spread of the virus. The global management consulting firm McKinsey & Company recently released a report that suggests combined global government deficits could reach $30 trillion within three years as a result of policies and actions taken by governments in order to keep their respective economies afloat.

The airline industry was hit particularly hard by COVID-19. In April, the US government agreed to pay $25 billion to bail out the country’s airline sector as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Passenger airline companies like American Airlines, Southwest, United, and Delta received grants. American received nearly $6 billion for payroll support and planned to request an additional loan of $4.8 billion.

Many European and Asian countries began gradually reopening around Mid-June, while the majority of states in the US allowed restaurants and other businesses to reopen in May. Yet, international travel out of the US was still prohibited as of late June. Similarly, the US-Canada border remains closed, with some exceptions.

Global Level 4 Health Advisory in the US

The US Department of State issued a Global Level 4: Do Not Travel advisory on March 31. This advisory has remained in place as of June 23. When it was issued, the Department of State prompted American citizens in foreign countries to immediately arrange for return flights home or to visit the closest US Consulate or Embassy to seek assistance.

Earlier that month, the Department of Homeland Security designated 13 international airports in the US through which American citizens in the United Kingdom, Ireland, and the Schengen area could return home. Everyone returning from these countries were required to self-isolate for 14 days. Airports included San Francisco International Airport, Newark Liberty International Airport, Miami International Airport, and Hartsfield-Jackson Atlanta International Airport. The Schengen area encompasses 26 European countries, including Austria, Denmark, Greece, Norway, and Spain.

Limited Exemption to Enter Canada

While the US-Canada border has remained open for essential travel, it was shut down for nonessential travel on March 21. At that time, US Secretary of State Mike Pompeo stated that the border would stay closed for 30 days, but the order was renewed for another month on June 16. However, Canada agreed on June 8 to open its border for immediate family members residing in the US and other countries with the requirement that they self-quarantine for 14 days upon arrival.

Regarding the border restrictions, Canada's Minister of Immigration, Refugees and Citizenship Marco Mendicino emphasized the importance of continued measures to monitor and prevent the spread of COVID-19. In the same statement, he explained that the stipulations for entering the country represent a responsible, incremental, and thoughtful response to achieve that goal.

Airline Losses

Major US airlines are being supported by a $25 billion bailout, and Canada's most prominent airline, Air Canada, recently raised $1.23 billion in financing to bring its own pandemic-assistance total to $5.5 billion since mid-March. However, Air Canada lost in excess of $1 billion during the first quarter of 2020, and its CEO, Calin Rovinescu, believes that the company likely won't record revenues similar to 2019 for another three years. In the US, Delta announced in Mid-June that it expected to add around 2,000 of flights per day throughout July and August. However, it still projects its August domestic capacity to be down as much as 60 percent from normal levels.

The decline in domestic flights and absence of international travel has caused airlines throughout North America and worldwide to cut operating costs and lay off workers. More than 400,000 people per day on average were screened at US airports from June 1 to June 16, which represents an 83 percent decline from that time period in 2019.

The International Civil Aviation Organization (ICAO) has been monitoring the economic effects of COVID-19 on civil aviation and has developed analytical models indicating estimates for the most positive and negative global outlooks for 2020. Its most optimistic projection is a 48 percent decline in international seats offered for a total airline revenue loss of $195 billion. Worst-case estimates are a 63 percent decline in seats offered and $254 billion in lost revenue.

The Future of Cruise Ships

The airline industry is expected to recover from the COVID-19 pandemic’s effects, but cruise ships might experience challenges. Due to negative publicity as a result of inadequate virus-infection control onboard and several ships forced to dock for weeks at a time, tourism and travel experts believe that many operators will need to revamp their business plans and enact stringent health and safety protocols to keep from going under.

Pullmantur Cruceros has already been forced to file for bankruptcy reorganization under Spanish insolvency laws to stay in business. The Spanish cruise line has also cancelled all cruises through November. Additionally, Cruise Lines International Association members have agreed to suspend services departing from US ports until September 15, 2020, despite the fact the US Centers for Disease Control and Prevention's No Sail Order was set to end on July 24 at the time of their announcement.