An explainer on the airline industry's response to the outbreak so far and its potential financial exposure compared to SARS in 2003.
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.
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.
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