The new coronavirus outbreak claimed its first victims in the Israeli travel industry, as the travel packager Issta said it was putting some staff on unpaid leave and the airline Arkia said it was planning layoffs of up to 5% of its payroll and other cost-cutting measures.
Issta said the unpaid leave would affect employees in sales and at headquarters. In addition, it said it would be cutting pay for senior executives.
In a letter to employees titled “Arkia in Crisis,” CEO Uri Sirkis said the airline was working on the assumption that the worst of the virus’ impact would be felt this month and begin to dissipate in March.
Nevertheless, even in that scenario, the airline will show a heavy loss in the first quarter and experience cash flow problems through May, he warned. Sirkis said he was assuming Arkia would get no government aid.
“Since it all started, we haven’t had any new reservations and a lot of direct flights have been canceled. From China the damage has spread to surrounding areas like Hong Kong and Thailand, which has seen a 50% declined in traffic from the same time last year. In Singapore and Cambodia’ we’ve seen a drop of 20%,” said Ziv Rozen, CEO of the online travel site Gulliver.
Italy, usually among the top five travel destinations for Israelis, has also been swept up in the coronavirus panic after it reported more than 130 cases, and three deaths, since Friday. Airlines have slashed ticket prices by more than $70 on average to lure travelers. Searches for flights to Italy have fallen more than 30% and cancellations are likely to follow on reservations already made, Rozen said.
“If a year ago the average airfare was $360, today it’s $290. If the Italians don’t gain control over the situation and the virus reaches Milan, there will be even a bigger drop,” he said.
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A senior tourism executive, who spoke on condition of anonymity, said online travel companies were better able to cope with a short-term crisis than traditional ones that rely on offices and travel agents.
“Everyone is tightening their belt and monitoring the data, but there’s a difference between companies that sell tickets online because all their costs are on technology, compared with companies that employ agents, such as Issta, where the damage is more significant,” the executive said.
Beyond Italy the situation in Europe is more complicated, sources said. Travel companies reported a drop in short-term demand, but an increase for the summer months. Rozen said that was because El Al Airlines and charter carriers have offered refunds for cancellations without a penalty.
“This has brought back the demand for individual travel reservations for the summer, which is also the smart thing to do, because as soon as the danger of the coronavirus ends, prices will rise dramatically,” he explained.