The coronavirus brings the pain of job loss and cut salaries, but also relief for our overheating planet

As the world’s equity markets went into vertiginous free fall last week and the awesome economic ramifications of the Covid-19 pandemic finally sank in, Katie Martin at the Financial Times hit the nail on the head – investors are “being humbled by one thing they clearly had not considered: real life”.

For much of the past year, economists and investors anxious about the unsustainably inflamed state of global equity markets had been poring over spreadsheets in search of forces that would ultimately bring the market back to earth. A few had been looking to the climate crisis, and a few more at global oil prices. None had reckoned with the devastation of a humble coronavirus.

Real life has bitten back with a vengeance. CLSA estimated that US$13 trillion had been stripped from equity market values worldwide, noting that this was more or less equal to US$3 billion for each coronavirus death so far. Since the world’s financial markets are valued at around four times the size of the global economy, and with further equity market falls expected in the weeks ahead, there could be an awful lot of pain still to come.

But as central banks and hastily assembled government task forces talk about high-level monetary and fiscal relief measures, the challenge for most of us mere mortals is to get our heads around the real-life implications of what has happened, and where things go from here.

All the anecdotes are alarming: thousands of concerts, conferences, exhibitions and trade fairs being cancelled; schools being closed; film stars and political leaders testing positive; Europe’s football seasons being curtailed; the Olympics being threatened.

Some delays – like China’s National People’s Congress, or Donald Trump’s planned meeting with Asean leaders in Las Vegas – might not be such big losses. And I see great sense in postponing release of the new James Bond film, No Time to Die.

But the costs linked with some cancellations are high: the Hong Kong Rugby Sevens earns us at least HK$380 million a year, based on past precedent. UFI, the global association of the exhibition industry, reports that more than 500 major trade shows have been cancelled or postponed – including dozens of trade fairs and exhibitions in Hong Kong – with US$26 billion in export contracts left unsigned.

World’s wealthiest lose nearly US$1 trillion in stock market rout

When it comes to translating the costs of Covid-19 into the real economics of our daily lives – jobs in jeopardy, salaries being cut, savings and pensions being clobbered – the global travel and tourism industry provides some of the grimmest insights, with aviation at the forefront.

According to the International Civil Aviation Organisation, travel and tourism generated US$8.3 trillion in 2017, supporting 313 million jobs. That’s one in 10 jobs worldwide. Hotels and resorts generated US$878 billion. Airlines carried more than 4 billion passengers and supported more than 60 million jobs.

As the coronavirus puts the world economy on lockdown, this global economic dynamo has been sent to the brink of collapse. Alex Cruz, CEO of British Airways, circulated a note to 45,000 employees titled “The Survival of British Airways”. He warned of significant job cuts and route suspensions “in a way that we have never had to before”, while aviation trade body Airlines UK said over the weekend the UK’s aviation industry might not survive the pandemic without emergency financial support. Delta cut flight capacity by 40 per cent, as Donald Trump barred most travel from Europe to the US.

Cathay Pacific, which released 2019 results already shredded by six months of civil unrest in Hong Kong, left it to Note 16 in the report to comment on an “Event after the reporting period”. Passenger capacity was cut by 30 per cent in February, and would be cut by 65 per cent in March and April. Frequencies have been cut by between 65 and 75 per cent. About 25,000 employees are taking unpaid leave. Noting it had “available unrestricted liquidity” of HK$20 billion, it assured those who had managed to read the report Note 16 that “the group will remain a going concern”.

That a group of Cathay Pacific’s substance needs to give such assurances is a measure of the gravity of the crisis we face. Look at Air France-KLM, Lufthansa, British Airways, Delta, United or Southwest, and you see similar measures. You see share prices gutted by up to 25 per cent since the onset of the Covid-19 crisis.

Behind them, Boeing’s share price crashed 18 per cent last Friday, and is 50 per cent down from March last year when its second 737 MAX crashed in Ethiopia.

Life after Covid-19: we must rethink our travel and global supply chains

On behalf of China’s airlines grounded at the heart of the Covid-19 epidemic, the Civil Aviation Administration of China reported losses of US$3 billion in February, with passengers down 84.5 per cent, and cargo volumes down 21 per cent. It said 10,000 flights a day had been cut, grounding about two-thirds of the country’s fleet. That is why a daily 3,000 visitors arrived in Hong Kong in February, compared with a daily 200,000 the same time last year.

International Air Travel Association’s chief economist Brian Pearce estimated even before last Friday’s downward lurch that the aviation industry would likely lose between US$63 billion and US$113 billion this year. The World Travel & Tourism Council says 50 million jobs are in danger.

Put these forces together, and it is small wonder that hotels are admitting occupancy rates of 5 to 10 per cent, why restaurants and retail shops are shuttered or empty, and why so many millions of ordinary people’s jobs and pay cheques are at risk. And we are told that the economic impact of the Covid-19 pandemic is going to get worse before it gets better, and that a rapid recovery is highly unlikely.

As a Financial Times editorial noted last week, “the virus should not obscure what is by far the largest threat to the [airline] industry: climate change.”

This was echoed by Cambridge engineering professor Julian Allwood, one of the authors of the report, “Absolute Zero”, who said: “The only way the UK can get to net zero emission aviation by 2050 is by having a substantial period of no aviation at all.”

For the authors of “Absolute Zero”, Covid-19 seems to be doing their job for them, and is exactly what the planet needs. But those wringing their hands over the harm being done to millions of livelihoods worldwide may take a different view.

David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view