As coronavirus grew from a Chinese outbreak to a global pandemic, the aviation industry was at the leading edge of the accompanying financial crisis. Since the extraordinary intercontinental travel ban imposed by President Trump last week, the disastrous potential extent of the crisis for airlines has become clear.

A drop-off in demand, as businesses cut back on travel and passengers deferred holidays, is being replaced by government decrees and mandatory public health measures. If much lost trade has so far come in the quiet months for western carriers in the northern hemisphere, the prospect of losing spring and summer bookings is another scale of financial loss altogether.

Already, major airlines – even the likes of British Airways and German carrier Lufthansa, let alone the financially precarious Norwegian – have made it clear that this is now a challenge to their very survival. The speedy escalation of the crisis, with major hubs such as Madrid now following Rome in being declared off-limits to non-essential travel, makes it impossible to predict whether this is a hiatus – or if measures announced as temporary could last for much longer.

As British Airways’ boss, Alex Cruz, told 45,000 staff on Friday, for airlines this is already bigger than the Sars epidemic, the aftermath of 9/11 or the 2008 financial crisis. In extraordinary times, the normal rules will no longer apply. Flag carriers have swiftly appealed for state aid. Layoffs could be temporary, or permanent. Already a glut of planes are mothballed.

Airline seats are perishable goods, and most of the revenues will never be recouped

The withdrawal of most scheduled international air travel, even for a short time, no longer looks improbable as much of Europe approaches the kind of shutdown so far seen only in Italy. Indeed, the idea of shuttling vast numbers of people anywhere, let alone between infected countries, has rapidly started to look reckless.

Yet it is worth noting that public transport continues to function in Italy; people still need services, food and goods. And a plane flying in Chinese medics and supplies was warmly welcomed to Rome on Friday. That flight was another reminder of how aviation remains an essential part of our world; why governments have long subsidised flag carriers, at vast expense.

Last week’s emergency measures included the cancellation of international sporting fixtures – taking away another small but significant slice of life that is dependent on air travel. But before the latest escalation, planes had been flying almost empty, with many of the dwindling numbers of passengers deciding not to show up – something that made clear how many airline trips are entirely discretionary.

Perhaps, if and when normality returns, there could be a glut of pent-up demand from societies forced to work from home or self-isolate. But airline seats are perishable goods, and most of the revenues will never be recouped; many of those who might have booked holidays can expect to see annual leave used up to care for children sent home from school, or sick relatives. Business travel that has been postponed for health fears may end up looking like an unaffordable expense for many firms, should coronavirus lead to recession.

A sustained pandemic could vastly alter the industry. Far smaller shocks have caused weak airlines to go under; but even the big players are likely to have their wings clipped. The appetite for travel may be an ancient human urge, but global hypermobility is only a couple of decades old. Action on climate change may have restricted aviation; higher fares from reduced competition might yet do more. Now, societies forced to do without flying may also start to question whether the habit was worth it.

Even before coronavirus, protectionism in trade and the political willingness to erect fresh borders with neighbours had re-emerged to a startling extent. A world haunted by viruses arguably needs globalised structures more than ever, but is meanwhile ever more ready to slam international doors. Airlines, so often the canary in the coalmine for the global economy, may never fly quite so high again.

Saudi ruthlessness on display once more



It was not so long ago that Crown Prince Mohammed bin Salman hoped to convince the global financial community that Saudi Arabia was a respectable modern economy, home to Saudi Aramco – the world’s most profitable listed company – and a power broker in stabilising oil markets.

But if Prince Mohammed had expected to establish a reputation as a moderniser and visionary, then waging an oil price war during a deadly pandemic might not have been his most considered move.

The world’s largest oil exporter triggered the worst day in the financial markets since 1987 last week after firing the starting gun on a race to pump more oil than the global market can absorb. The benchmark price fell by its fastest rate since the 1991 Gulf war to lows not seen in four years, wiping billions from the market value of companies across the energy sector.

These companies form the pillars of global equity markets, which buckled under the pressure of plummeting share prices and fears that the economic contagion of the Covid-19 virus might trigger a worldwide recession.

The decision of the Saudi crown prince to wreak havoc on the global markets is both shocking and true to form.

Prince Mohammed is never far from accusations of extortion, torture and even murder, all denied. If the oil market is a game of money and power, he is playing for the latter. By flooding the world with cheap Saudi oil, the kingdom will corner the global market and reassert its dominance against the rise of Russia and American shale production. It is a race Russia is willing to run, but there is no doubt that this is a race to the bottom.

At least there is one constant in the markets: the ruthless impetuousness of the Saudi regime.

Intu must auction off the crown jewels



Shopping centre owner Intu is unlikely to last until the end of the year in its current form, despite boasting nine of the UK’s top 20 malls, including Manchester’s Trafford Centre and Lakeside in Essex.

A £2bn loss, postponement of an emergency cash call, questions about its status as a going concern, and a share price down more than 90% over the past year – the group’s debt problems are mounting. Hovering below 5p, Intu shares can now be purchased for less than the cost of a “bag for life” in the shops that rent space in its centres.

Struggling retail chains have taken their toll on Intu’s rental income, all while the shopping-centre company groans under £4.5bn of debt, compared with a market value of about £60m.

For it to access its new overdraft facility in October 2021, its banks have demanded that it raise at least £1.3bn from investors. Most analysts believe Intu won’t reach that date without drastic action.

The company’s management is putting on a brave face, insisting they have options. But the time for selling mid-tier assets and tinkering around the edges is over. Survival means facing up to the unpalatable – auctioning off the crown jewels, such as the Trafford Centre.

The company holds the debt for each centre in separate vehicles, rather than at group level, making any move to take Intu private costly and complex, even for an investor such as billionaire John Whittaker – the original owner of the Trafford Centre – who runs Peel Group, Intu’s largest shareholder.

The value of Intu’s properties tumbled by 22% last year. Further falls of just 5% would see the loan-to-value ratios on some of its centres hit danger levels. If it triggers a covenant, as occurred in January with Gateshead’s Metrocentre, the banks could ask for the keys back.

And this is without adding coronavirus into the mix. In pandemic times, how many shoppers will want to rub shoulders with thousands of others at large indoor malls?