Impact of Coronavirus on Global Air Travel

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Business/Aviation

Chinedu Eze writes on the suspension and disruption of flights due to the fear and effect of coronavirus, which has claimed many lives.

When coronavirus was announced to the world two about two weeks ago, the world was yet to appreciate its devastating effect. But the world became petrified when the figures of the victims began to rise. World Health Organisation (WHO), which treated it with levity, initially literally mounted the rostrum to warn about how lethal the disease.

China quickly took a critical but radical step to quarantine the city, Wuhan and ensured nobody travels in and out of the city.

While everyone is appalled about coronavirus, it is feared that it would spread very fast through air travel. That reality set on a panic button. And like ebola and Severe Acute Respiratory Syndrome (SARS), airlines and airports have put up stringent measured to checkmate the spread of the virus.

Ironically, like coronavirus, SARS started in China in 2002, so the most populous country seemed to be the most determined to find cure for the virus. As at Friday, about 7,711 persons had died of the virus in China.

Airlines Pull-out

Reports indicate that American Airlines, United Airlines, British Airways, Air France, Lufthansa, Swiss, Australian Airlines, Lion Air, Finnair,Cathay Pacific and Ural Airlines have cancelled flights to China due to Wuhan coronavirus outbreak. Fears of the virus have led to plummeting demand for travel to China.

Air France suspended its three weekly flights to Wuhan on January 24, but as of Wednesday morning said it was maintaining its 23 weekly flights to Beijing and Shanghai.

AFP reported that British Airways, which flies daily from London’s Heathrow airport to Shanghai and Beijing, said it had suspended all its flights to and from Mainland China.

Indonesia’s Lion Air Group, Southeast Asia’s biggest carrier by fleet size, is halting all its flights to and from China owing to the deadly coronavirus, a company spokesman said Wednesday.

Hong Kong-based carrier, Cathay Pacific, said it would progressively reduce capacity by 50 per cent or more on its routes to Mainland China from Thursday through to the end of March, adding that the reduction concerns both Cathay Pacific and its Cathay Dragon subsidiary.

Also, Finnair said the suspension of group travel from China was leading it to suspend some flights beginning February 5 through most of March.

US carrier United Airlines said it would trim its service to China from the United States in light of a big drop in demand following a call by US health officials to avoid non-essential travel to the country.

Russia’s Urals Airlines, which had already suspended flights to several destinations in China, also announced on Wednesday that it was cutting some services to Europe popular with Chinese tourists, including Paris and Rome, because of the outbreak.

Economic Impact

CNN.com reported recently that the coronavirus could cost China’s economy $60 billion this quarter, urging that Beijing would have to act fast to avert a bigger hit.

“China may have to cut taxes, boost spending and slash interest rates to prevent the coronavirus outbreak wreaking havoc on an already fragile economy.

“The economic impact of the virus is still impossible to determine, but one state media outlet and some economists have said that China’s growth rate could drop two percentage points this quarter because of the outbreak, which has brought large parts of the country to a standstill. A decline on that scale could mean $62 billion in lost growth,” CNN reported.

The report noted that China could ill afford that kind of hit and remarked that growth last year was already the country’s weakest in nearly three decades, as China contended with rising debt and the fallout from its trade war with the United States.

The report said so far, policymakers have taken some steps to help the businesses that are most affected by the rapid spread of the disease.

Central and local governments have allocated $12.6 billion so far to spend on medical treatment and equipment.

Major banks have cut interest rates for small businesses and individuals in the worst-hit areas. And the Bank of China said it would allow people in Wuhan and the rest of Hubei province to delay their loan payments for several months if they lose their source of income because of the disruption.

The People’s Bank of China, the country’s central bank, has said that it would ensure there is enough liquidity in the financial markets when they reopen next Monday after a 10-day Lunar New Year holiday. When Hong Kong’s markets reopened earlier this week, the Hang Seng index(HSI) plunged nearly 6 per cent in just a few days of trading.

Effect on Airlines

With the cancellation and suspension of flights, international airlines are counting their losses because China has been a big boost to global air travel due to their huge population.

Experts said that in the short term this coronavirus would have significant effect on revenues but this would become less severe in the long run.

CNN quoted financial analyst, Ken Herbert, with financial services firm Canaccord, who said although it’s “very early into the current coronavirus outbreak,” several other outbreaks in recent years provide a framework that can be applied to the current situation. The note mentioned that although the current outbreak appears to be spreading faster than those past viruses, it has been less deadly so far.

Herbert said an average revenue drop of 13 per cent has been observed over past outbreaks, citing data from the International Air Transport Association, an airline trade organisation.

“However, we believe that all things considered, traffic tends to recover relatively quickly after a pandemic outbreak,” he said.

The brunt of the impact is expected to be borne by Chinese airlines that service Wuhan, the epicenter of the outbreak particularly those like China Southern, China Eastern, and Air China.

Economic Sledgehammer

The current virus has drawn comparison to the severe acute respiratory syndrome, or SARS, outbreak in 2003, a natural connection because both are caused by a coronavirus. SARS had a higher fatality rate about 10 per cent, compared to 3 per cent from the current virus which made it “an economic sledgehammer to airlines in the Asia-Pacific region,” the Canaccord report said.

As a result of SARS, which ultimately infected around 8,100 people, the report said revenue per passenger kilometer otherwise known as RPK, and also measured in revenue per passenger mile, or RPM fell by 35 per cent at the worst of the outbreak, and led to an 8% decline in RPKs in the region for all of 2003.

The 2015 Middle East Respiratory Syndrome, or MERS, outbreak also led to a strong impact. Although the infection only reached 1,300 people in the Middle East and South Korea, the report cited an unusually high 38 per cent fatality rate led to a 12 per cent dive in RPKs in the South Korean market for the first month of the disease’s spread, although passenger volumes recovered within two months.

In the past, the size of the total infected population seemed to have more of an impact on airline revenue than the lethality of the disease. The 2005 Avian Flu outbreak in Asia had a staggering 52 per cent mortality rate, but only about 116 people were infected. Regional RPKs only dropped 2 per cent, and recovered quickly.

Reuters reported that China’s growth has helped power a global aviation boom over the last decade, but as the country curtails travel in the face of a new coronavirus, a slowdown could hit the industry harder than ever before.

Prevention

THISDAY learnt that the Federal Airports Authority of Nigeria (FAAN) is already working with the Port Health Department of the Federal Ministry of Health to ensure that the virus is not imported into the country.

“All measures used to contain the dreaded Ebola virus have been re-activated afresh and more precautionary measures have also been taken to contain any eventuality,” FAAN said.

The Regional Manager in charge of MMIA, Mrs. Victoria Shin-Aba told THISDAY in Lagos on Wednesday that FAAN has activated public health emergency system and all stakeholders involved with air travel are being carried along.

She also disclosed that sensitisation is being carried out by a committee on communicable diseases being supported by the World Health Organisation (WHO), adding that a national emergency meeting was held Friday in Abuja and on Monday, FAAN wIll hold another meeting to domesticate the decisions taken at the national level.

Shin-Aba also said the agency has warned its staff to be very careful, adding that FAAN was considering limiting the operations of some airlines, but that would need to be approved by higher authorities.

“But we have directed all our staff who have anything to do with passengers to be more careful while processing passengers. We have also issued directives that anyone suspected to be exposed to the virus should be immediately quarantined. We have also involved the Lagos state government and we are strictly abiding by the health emergency plan. We are prepared for this because before the coronavirus, we were working on similar problem and that made us to be more prepared,” she said.