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Airlines across the world on high alert as coronavirus outbreak spreads

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Many airlines, including Korean Air Lines, Singapore Airlines' budget carrier Scoot, Taiwan's China Airlines Ltd and Japan's ANA, announced they were cancelling flights in and out of Wuhan after authorities announced a lockdown.

Travellers in face masks walk past a display board showing a cancelled flight from Wuhan at Beijing Capital International Airport. China closed off a city of more than 11 million people Thursday, halting transportation and warning against public gatherings, to try to stop the spread of a deadly new virus that has sickened hundreds and spread to other cities and countries in the Lunar New Year travel rush. Picture: Mark Schiefelbein/AP

Airlines and passengers are on guard
against a new flu-like virus that originated in Wuhan, China.

Here’s an explainer on the airline industry’s response to
the outbreak so far and its potential financial exposure
compared to SARS in 2003, which killed nearly 800 people:

WHAT IS THE EXPECTED FINANCIAL IMPACT ON AIRLINES?

The biggest concern is a sharp drop in travel demand if the
virus becomes a pandemic.

During the height of the SARS outbreak in April 2003,
passenger demand in Asia plunged 45%, according to the
International Air Transport Association (IATA).

Cathay cut nearly 40% of its flights and reported a
financial loss, as did Singapore Airlines Ltd, Japan
Airlines Co Ltd and ANA Holdings Inc.

The industry is now more reliant on Chinese travellers.

For example, in Australia, Chinese travellers account for
more than 15% of international arrivals, up from just 4% in
2003, according to Moody’s ratings service.

Those travellers, who arrive mostly via mainland carriers,
often take domestic flights once they arrive in Australia,
pointing to the potential for knock on effects for the likes of
local airline Qantas Airways Ltd if there is a fall in
travel demand.

Since 2003, the number of annual air passengers has more
than doubled, with China growing to become the world’s largest
outbound travel market.

A display board shows a cancelled flight arrival from Wuhan at Beijing Capital International Airport. Picture: Mark Schiefelbein/AP

In 2003, 6.8 million passengers from China travelled on
international flights, and that number has grown by close to 10
times to 63.7 million in 2018, according to data from the
country’s aviation authority.

Global airline industry revenues more than doubled to $838
billion in 2019 from just $322 billion in 2003, according to
IATA data.

“Whether only one secondary market, an entire country or the
wider region is impacted is obviously unpredictable and outside
of the industry’s control,” said Brendan Sobie, an independent
aviation analyst in Singapore.

WHICH AIRLINES ARE HEAVILY EXPOSED?

Many airlines, including Korean Air Lines,
Singapore Airlines’ budget carrier Scoot, Taiwan’s China
Airlines Ltd and Japan’s ANA, announced they were
cancelling flights in and out of Wuhan after authorities
announced a lockdown.

South Korean budget carrier T’way Air earlier
this week postponed the scheduled launch of a new route to the
city.

Flight tracking website FlightRadar24 showed that as of 0600
GMT on Thursday, 184 Wuhan flights, or 60% of the departures
listed for the day, had been cancelled.

Wuhan’s Tianhe airport serves around 2% of China’s total air
traffic and mainly serves domestic routes. Broker Jefferies
estimated 88.8% of overall flights are domestic, with China
Southern Airlines Co Ltd holding the largest market
share at 30%.

ARE PASSENGERS CANCELLING TRIPS TO CHINA?

Hanatour Service Inc, South Korea’s largest
travel agency, said that cancellations of trips to China
increased about 20% this week compared to same period last year.
The figure includes postponements and switches to other
destinations, a company official said.

Rajeev Kale, country head for Thomas Cook India’s holidays
division, said some customers were raising concerns about
travelling to China. “Most of our customers are adopting a wait
and watch approach to see further developments,” he said.

Philippine Airlines, Garuda Indonesia and Japan
Airlines said there was no slowdown in bookings to and from
China yet, while low-cost Filipino carrier Cebu Pacific said
some passengers had expressed concerns about whether it was safe
to fly but had not cancelled bookings. 

Reuters