Economic toll of virus sinks in, duration remains an unknown

Author: AP
Published: Updated:
Specialist Michael Pistillo works at his post on the floor of the New York Stock Exchange, Friday, March 6, 2020. Stocks are falling sharply again, and bond yields have sunk to more record lows on worries about the economic damage from the coronavirus outbreak. (AP Photo/Richard Drew)

The Dow Jones Industrial Average over the past five days: up 1,293, down 785, up 1,173, down 969, down 256. The Dow sank as many as 894 points Friday before recovering much of its losses. The VIX, an index known as Wall Street’s fear barometer, touched levels not seen since the financial crisis. The uncertainty and potential economic damage from the coronavirus deepened this week. Sectors that cater to almost any public activity — movie theaters, business conference organizers, hotels, airlines and amusement parks — have lost billions as investors flee to areas they perceive as safer, like U.S. Treasury notes, which now pay paltry amounts that are far less than inflation. Following is a brief look at how things are changing in the economy and the workplace today as the outbreak widens.

HEADWINDS: Germany’s biggest airline, Lufthansa, says it will cut up to 50% of its flights in the next few weeks, depending on how the virus outbreak develops. It said it had seen a drastic drop in reservations, with all regions now affected. Lufthansa, which also owns Swiss airlines and several smaller regional European carriers, operates over 83,000 flights a month. The airline earlier announced plans to cancel all flights to and from Israel for three weeks after Israeli authorities announced tough restrictions on travelers from several countries.

The airline industry is among the hardest hit since the outbreak, forcing carriers to reassess their near-term financial expectations. An industry group said the spreading coronavirus could cost airlines as much as $113 billion in lost revenue. That figure, released Thursday, is four times the number released just two weeks ago by the The International Air Transport Association, which is imploring governments for assistance.

Declining reservations have rippled outward to commercial aerospace companies. “The impact on airline profitability appears to be worsening by the day, and the spread of the virus and the impact on air travel has rapidly exceeded expectations of just a few days and weeks ago,” wrote Ken Herbert, an industry analyst with Canaccord Genuity.

SHIPWRECK: Passengers on a cruise ship off the California coast were instructed to stay in their cabins as they awaited test results Friday that could show whether the coronavirus is circulating among the more than 3,500 people aboard. Test kits were lowered onto the Grand Princess by rope from a military helicopter and they’ve been sent for analysis at a lab with the ship moored at sea just off of San Francisco, where it has been ordered to remain. Meanwhile, cruisers with upcoming trips complained on Twitter about difficulties getting cruise operators to offer refunds for canceling trips. Cruise stocks have been hammered since the outbreak began. Norwegian Cruise Lines and Royal Caribbean have both lost more than 50% of their stock value since the start of the year, while Carnival Cruise Lines, which owns the ship stuck off the California coast, has seen its stock drop 47%. Analysts expect cruise companies to offer heavy discounts as coronavirus fears lead to canceled trips. The cruise industry provided 1.2 million jobs and paid $50.24 billion in wages and salaries in 2018, providing an estimated $150 billion in global economic impact, according to Cruise Lines International Association, a Washington-based group that represents more than 95% of global cruise capacity.

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