Coronavirus wreaks havoc on airlines

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NEW YORK — Airlines around the world are counting the cost of the coronavirus that has led to thousands of China flights being canceled, with several Asian airlines teetering on the brink of ruin if the nation’s shutdown persists.

Many carriers have taken emergency measures in hope of offsetting expected losses resulting from the continuing slump in global traffic. In Hong Kong, Cathay Pacific Airways Ltd. — already feeling the impact of the city’s antigovernment protests — has asked all its staff to take three weeks’ unpaid leave, while Hong Kong Airlines Ltd. has sacked more than 400 workers. Asiana Airlines Inc., South Korea’s second largest carrier, also asked thousands of staff to take unpaid leave.

Australia’s Qantas Airways Ltd. said Thursday it was reducing services to Hong Kong and Singapore in addition to suspending flights to mainland China until at least the end of May, while Thai Airways International PCL has cut flights connecting Bangkok with Seoul and Singapore, as regional customers lose their appetite for travel.

China’s rise to the world’s second busiest aviation market after the U.S. has been a strong source of growth for all the world’s major airlines, which have expanded direct services to Chinese destinations in recent years, some offering dozens of flights a week. American Airlines Group Inc.’s namesake carrier, for example, normally operates 28 weekly flights between the U.S. and China.

But that has left them badly exposed to major disruption in China. As the epidemic worsened, many foreign airlines, including U.S. carriers, completely halted flights to Chinese destinations last month.

China’s own airlines have become some of the world’s biggest, with a global footprint. All have slashed services over the past month as the country battles the epidemic, which by Wednesday had infected 74,576 and killed 2,118 people in mainland China, according to the official count.

With millions of Chinese people facing travel restrictions and many others simply avoiding nonessential travel, regional demand for flights has collapsed, forcing carriers to cancel over 25,000 flights a week in total, according to aviation data company OAG.

The number of seats available on domestic Chinese flights fell 63% year-over-year to 5.4 million in the second week of February, OAG said. And many of those seats were empty, with daily passenger numbers down 91% on year as of Monday, according to the Civil Aviation Administration of China.

“No event that we remember has had such a devastating effect on capacity,” OAG’s senior analyst John Grant wrote in a Feb. 17 commentary. While the SARS outbreak of 2003 also hit aviation companies hard, the Chinese air-travel sector has since grown 10-fold.

The airline industry stands to lose $5 billion in revenue in the first quarter, the International Civil Aviation Organization estimates. As of Feb. 14 Chinese airlines had refunded over $2.85 billion to passengers unable to take canceled flights, according to the CAAC.

While China’s three big state-run carriers — Air China Ltd., China Eastern Airlines Corp. and China Southern Airlines Co.—are strong financially, some smaller players will struggle to sustain the crippling of their operations for long, said Paul Yong, an analyst at DBS Bank in Singapore.

Hainan Airlines is especially vulnerable, he said, thanks to the well-publicized debt struggles of its parent, HNA Group Co. The government could take the crisis as its cue to intervene and allow the big three to carve up Hainan Airlines’ routes—a move that was the subject of industry rumors long before the coronavirus epidemic began.

Yin Yijun contributed to this article.

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