In a normal season when the European summer would be close (since June) air flights would be more frequent and ticket prices would spike. Currently, not only bookings should be done after July, but flights to certain destinations are canceled or highly restricted such as flights to China, Japan, South Korea or Italy.
The International Air Transport Association (IATA) claims that to date the revenue impact on global airlines due to COVID-19 is close to US $29,300 million (€27.150 million).
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For Universidad Nacional Mayor de San Marcos (Lima, Peru) International and Asian Economy Professor and Coordinator of the Asian Research Center, Carlos Aquino, “the hardest and unavoidable blow has been to the aviation industry, as tourism has dropped because the Chinese are the most frequent travelers (16% of total travelers) and are responsible for 20% of the tourist income during their trips. In destinations such as Japan, South Korea or Thailand, the third part of the travelers is Chinese, so this is upsetting.”
According to the World Health Organization (WHO), “the coronavirus (CoV) is an ample family of viruses that can cause diverse diseases, ranging from a simple cold to serious diseases, such as the coronaviruses that causes the Middle East Respiratory Syndrome (MERS-CoV) and the Severe Acute Respiratory Syndrome (SRAS-CoV)”. This new coronavirus –named COVID-19– was discovered in the Chinese city of Wuhan on December 31 of last year. Twenty days later, the capital of the Province of Hubei was quarantined.
“Everything is at a standstill in Wuhan, a city famous for its electrical appliance and cellphone production and now it is all paralyzed. The rest of China’s manufacturing plants are open but working at 50% capacity due to movement and transportation restrictions. China produces 90% of the computers, 70% of the air conditioners and 80% of the smartphones in the world. If the situation continues, in a month there could be a shortage of goods, spare parts for automobiles and electrical appliances, TV parts and components, radios and shortage for automobiles manufactured around the world”, added Professor Aquino.
However, China, having a stable economy can withstand the situation of stopping the country completely, as the most important near-future scenario is to contain and diminish the internal contagion and recover its population.
As has been seen, the Chinese can build a high-level hospital just to treat the disease, and where the medical and nursing staff carry out extreme measures to tend to patients infected by the COVID-19, as opposed to what occurs in unstable and vulnerable countries that do not have an established health system, nor the necessary funds to respond for the contagion cases.
“The situation is even more concerning in countries such as South Korea, Iran, and Italy because the pandemic could cause a recession... Italy is part of Europe and the fear is for the virus to turn into a pandemic,” said Aquino.
Compared to the Asian countries, some Latin American countries are at a disadvantage because most healthcare systems are not enough to treat all patients in normal peaks of the disease, the healthcare access is not free and their services are not that efficient.
Whereas the Asians may opt for adapting to employment forms such as the so-called home office or scheduling flexibility, in Latin America, these benefits do not apply to all kinds of contracts, added to the precarious healthcare systems, which stand out for its low access to drugs and scarce healthcare coverage or delays in medical appointments.
According to the Central American Institute of Business Administration (INCAE, for its Spanish acronym) survey to 1,281 healthcare workers in 18 Latin American countries, the main issues of the system may be summarized in lack of hospital equipment, including rooms, clinics, beds, and surgery rooms.
This also added to the volatility of the US currency, which in countries such as Colombia has passed the Col $3,500 barrier, increasing foreign debt as well as copper prices, so important in countries such as Chile and Peru which has dropped 10% of its price this year alone.
This February, the Italian stock exchange shrunk more than 5%, the Brent dropped almost 4%, and the price of oil fluctuates day to day and gold prices are on the rise.
For the expert, this situation could begin to stabilize as of May or April (if it doesn’t turn into a pandemic.) For now, “the stock exchange dropped for fear of the virus expansion and reaching countries whose weak institutions and healthcare systems are not as organized as those of China or Japan, which can take a while to reach a crisis,” added Aquino.
Despite this situation, projections indicate that the world economy will grow less this year; according to the OCDE ,less than 0.5% in comparison of how it would grow if this situation had not been so (2.4% annually, instead of 2.9%) supposing the crisis is surmounted before midyear, if the situation persists, the global economy will grow even less.
Although flights are not completely restricted, many flights to Asian countries have been canceled. People with ties to these countries have not been able to travel back to the life they built outside their native countries and now face an imminent arrival of the virus.
With confirmed cases in the United States, Mexico, Chile, Colombia, Ecuador, Argentina, and Brazil, airlines have opted to lower the number of flights to avoid infections. At international airports, the health protocols are increasingly more severe and flights are scarce.
In Europe, at least 80 airlines are not traveling to very sought-after tourist locations; canceling the Giro de Italia would be a disaster due to its strong unstable political situation, which has impeded its economic growth. For now, airlines such as Vueling and Ryanair have canceled flights to Italy while British Airways, Lufthansa and EasyJet are restricting flights.
Not only Italy is in a dire situation, but Israel will also ban the entry of tourists from European countries, including Spain; China on its part left hanging close to 80% of the aerial connections with the world.
Also previously announced film releases and filming in different parts of the world have also been postponed. Due to the coronavirus, the world’s largest tourism trade fair in Germany, with 10,000 confirmed exhibitors has been canceled. France canceled its International Tourism Tradeshow that expected 5,000 visitors and the mythical Carnival of Venetia was also canceled.
However, one of the maximum concerns after the outbreak and expansion of the virus is the Tokyo Olympic Games of this year. According to the International Olympic Committee, the most important sporting event in the world will take place as planned between July 24 and August 9.
“If the games are not carried out, this would be a terrible blow to Japan due to all the money they have invested, but it is clear that still, they do not know when the infected peak of people will be reached”, claims Dr. Aquino.
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