‘It’s survival of the fittest for airlines fighting coronavirus crisis’

Asia-Pacific budget airlines are thought to be most at risk from a slump in demand caused by coronavirus outbreak
Qantas' boss has warned that poor profitability among some carriers in the Asia-Pacific region puts them in a difficult position amid the coronavirus outbreak
Qantas' boss has warned that poor profitability among some carriers in the Asia-Pacific region puts them in a difficult position amid the coronavirus outbreak

Some of the Asia’s weakest airlines are most exposed to the impact of the coronavirus outbreak, which has caused demand for air travel to China dwindle over the last two weeks.

According to Qantas' chief executive, it is now a case of 'survival of the fittest'.

The outbreak has so far caused more than 200 deaths and has seen airlines from around the world forced to suspend services to China because of a drop in demand and because of global efforts to prevent the spread of the virus.

Major airlines in Asia, Europe and the US, including British Airways and United Airlines, have suspended numerous services to mainland China. In the Middle East, Etihad Airways has also suspended some services because of low travel demand.

While profits of large international carriers in the Middle East, Europe and Asia may be dented by the coronavirus fallout, it is Asia-Pacific’s airlines, which are more reliant on the Chinese market, that are bearing the brunt.

Experts believe the coronavirus could impact airlines more heavily than the SARS epidemic of 2003, which saw air traffic among Asia-Pacific carriers nosedive by 45% in April of that year.

Carriers in the region lost $6 billion in revenue and 8% of their passenger traffic in 2003, according to IATA’s data. And Hong Kong’s Cathay Pacific suffered a $155 million loss in the first-half of 2003.

Since then, Asia-Pacific has seen the launch of a raft of budget carriers and capacity has soared, often quicker than demand.

The recent fall in traffic combined with the ongoing US-China trade war mean Asia-Pacific’s low-cost carriers, which rely on leisure travel, are particularly at risk now, according to Alan Joyce, CEO of Qantas.

In an interview with Bloomberg, he said: “A lot of airlines may not be able to keep some of these operations going. It’s survival of the fittest.”

“A lot of them have huge growth and not much profitability. Things like this can have an impact on these models.”

According to Joyce, Qantas is prepared to cut its international capacity by 20% in response to the drop in demand caused by coronavirus, which could cost it tens of millions of dollars.

Most of Qantas’ business relies on a healthy domestic market, although Australian airspace was disrupted recently amid nationwide wild fires.

Data compiled by Bloomberg shows that 19 of 51 listed Asian airlines are unprofitable and most have profit margins below 10%.

Airlines still operating flights to China despite the virus spread are taking measures to prevent the spread of the disease.

Cathay Pacific will no longer provide hot towels, pillows, blankets and magazines to passengers on some flights, it said.

Meanwhile, Thai Airways’ cabin crew will wear masks and gloves on certain flights and all aircraft returning from mainland China will be disinfected.

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