Must-know: SARS’ impact on the airline industry

SARS’ impact on the airline industry

The airline industry is vulnerable to global events. Recently, it has been impacted by political disruptions and fatal disease outbreaks. As a result of the terror attack on September 11, 2001, the global airline industry recorded losses of $13 billion. Click here for more information about the financial impact of the terror attack.

All major U.S. airlines—including Delta (DAL), United (UAL), American (AAL), Southwest (LUV), JetBlue (or JBLU), and Alaska (or ALK)—were negatively impacted. Investors can gain exposure to airline company stocks when prices are low. They can gain exposure through exchange-traded funds (or ETFs) like the SPDR S&P Transportation ETF (XTN).

Severe acute respiratory syndrome (or SARS)

SARS was another disease outbreak in 2003. SARS caused a panic similar to the current Ebola outbreak. SARS was a viral respiratory illness. It was reported in Asia in 2003. It spread to many countries in the Americas and Europe. According to the World Health Organization (or WHO), 774 of the total 8,098 people who were infected with SARs died. This is much less than the 4,000 deaths recorded in the three countries in West Africa infected with Ebola.

According to the International Air Transport Association (or IATA), even though SARS caused fewer deaths, it caused severe economic damage to China and Hong Kong’s economies.

• The global cost was estimated at $33 billion. This was 0.1% of gross domestic product (0r GDP) in 2003. It cost the U.S. economy over $7 billion.
• The airline industry was impacted by the reduction in traffic or revenue passenger kilometers (or RPK). Asia Pacific Airlines lost 39 billion RPKs—8% of the annual traffic. This caused ~$6 billion in revenue loss. North American Airlines lost ~$1 billion. They lost 12.8 billion RPKs—3.7% of total international traffic.