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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.

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