It’s time to PANIC. At least, that’s what appears to be happening with the coronavirus that has begun spreading around the world. Governments and airlines have reacted quickly and dramatically. The airline response, at least, isn’t an overreaction. It’s just not a reaction to the virus itself. The reaction, instead, is due to the near complete disappearance of demand for flights to China.
When the virus first showed its ugly head around Wuhan, the Chinese government was determined not to look flat-footed in its response. After all, that’s what happened during the SARS outbreak, and there was widespread criticism. This time, it used the nuclear option.
China effectively shut down all of Wuhan and the surrounding regions. Transportation was suspended and 50 million people were trapped overnight. We can debate the merits of that kind of reaction, but this is an airline blog, so that’s beyond the scope here.
What we do know is that, obviously, airlines had to cancel flights to Wuhan since the government had shut everything down. No US airlines fly there, but partner airlines do. Chinese airlines have mostly just issued a blanket waiver saying that anyone can refund any flights that touch Wuhan, and that’s pretty extraordinary. From what I’ve seen, it looks like it can now be done for travel on any date, even months in advance.
But this was just the tip of the iceberg. Like the virus, the flight cancellations have begun to spread beyond Wuhan, and governments worldwide are restricting entry and transit.
Singapore, for example, won’t allow anyone to come into or through the country if they’ve visited the area around Wuhan in the last two weeks. Italy, on the other hand, is allowing people in, but all general aviation flights from China have to land at either Milan/Malpensa or Rome/Fiumicino for further special handling. No flights to other airports are permitted.
With the possible exception of Singapore, most of what we’ve seen countries outside China doing is sensible. If you see what the airlines are doing, however, then you might think they’ve lost their minds. British Airways has been getting headlines for canceling all flights to China with a hazy planned resumption date. That’s a daily flight to both Beijing and Shanghai that’s gone for the near future. But it’s far more than that.
Lufthansa Group (including Austrian, Lufthansa, and SWISS) is cutting all flights to China (excluding Hong Kong) through February 9, but it isn’t taking bookings for flights through the end of February. Finnair is a big player in China, but it is ditching three flights per week to Beijing and two per week to Nanjing until the end of March.
The list goes on. Air India is stopping Shanghai through February 14th. IndiGo is done in Chengdu until a week after that. Flights between Hong Kong and mainland China have been slashed in half. There’s a good chance there will be more between the time I wrote this and the time it gets published.
But if we look at US airlines, we can really see the motivations here. American spokesperson Curtis Blessing had this to say:
Given the significant decline in demand for travel to and from China, American Airlines will suspend travel between Los Angeles International Airport (LAX) and Shanghai Pudong Airport (PVG) as well as LAX and Beijing Capital International Airport (PEK) from Feb. 9 through Mar. 27, 2020.
And United put out a very detailed memo detailing 24 flights it would cancel between the US and China through February 8. In its statement, United said:
Due to a significant decline in demand for travel to China, we are suspending some flights between our hub cities and Beijing, Hong Kong and Shanghai beginning Feb. 1 through Feb. 8. We will continue to monitor the situation as it develops and will adjust our schedule as needed.
You could be forgiven for thinking I had just pasted the same thing twice if you only read the first sentence. Both airlines very clearly didn’t blame this on the coronavirus. They blame it on public reaction which is leading to a massive drop in demand.
To be fair, for American this is an awfully convenient excuse to cancel two terribly-performing flights. I’m not suggesting that American is hiding behind the coronavirus, not at all. It’s just that the threshold for canceling these flights has to be pretty low because they are underperformers.
United has gone with a more surgical strike, but these seem like the tip of the iceberg. The virus will continue to spread and there will be more cases. Until it has run its course, people will be afraid to fly to China. Government warnings and restrictions only help feed the fear and compound the problem for airlines.
Once we know more about the virus, we may learn that it’s not as deadly as people fear and restrictions can ease. (At least, that’s what I hope we will hear.) But if we’ve learned anything from the past, even if things are given the all clear, it will take time for demand to recover. Right now, we’re in a downward demand spiral.
I sit near people work who help coordinate and book the transportation for export shipments, including those to China, with both air and sea shipments moving daily. Yesterday was reminiscent of a dramatic movie, as it seemed like every hour news came in that another airline was suspending flights to China. Finally the company’s freight forwarder let us know that we were cut off entirely, and calls were made to the warehouses: “Stop picking China [orders]”.
I’m sure similar scenes played out yesterday at importers, exporters, manufacturers, and logistics firms all over the world.
I understand the concern and the impulse to take action, even at the risk of potentially overreacting, and my heart goes out to those in China and those who are impacted by the virus. I’m not personally worried about the coronavirus when it comes to catching it myself, but I am seriously concerned about how the coronavirus situation will affect the world economy, especially if it drags on for a while.
I’ve been following this rather closely and see the impact on the economy more telling than what the Chinese state media is saying. Shutting down commerce for such a huge portion of the country has got to be profound on their economy. Xi would not do that if this were not something to be very worried about. Extending the Chinese New Year holiday alone is going to have a major impact on not only the economy of China but ripple through the entire world. If this was a nothingburger you can bet they wouldn’t be doing that.
I’m a +1 on this. Call me old fashioned but I don’t think Chinese statistics are worth the paper they are printed on. This could be overreaction. . . . but I’ll take bets against.
And thoughts on Delta’s actions?
tvmccabe – Delta has taken the long view on this one and has already cut some flights into April. It’s the same thing. They just aren’t waiting around to see how bad demand gets. They think they already know.
What about Delta & it’s partners China Eastern & Southern.
As I wrote on a different blog & you touched on briefly, the Chinese government knows a lot more than they are letting on. What they fear most is public unrest if the truth about this virus ever got out. That is why the government controls the flow of information. But as you said that this is an aviation blog & I wonder what the mid & long term outlook will be after everything settles down.
Looks like they’re cutting as well: https://www.usatoday.com/story/travel/news/2020/01/29/coronavirus-british-airways-lion-seoul-air-suspend-flights-china/4606966002/
SEAN – I agree that we can’t trust that the Chinese are accurately telling us what’s going on. Eventually at least some of that will come out, especially if the spread goes beyond China’s borders more substantially.
At this point, the mortality rate is really what we need to figure out as well as how easy it can spread.
Current data suggest coronavirus has same mortality rate as influenza – 2%. Infection rate for influenza and SARS is 2 (each infected person is likely to infect two others), coronavirus has an infection rate (currently) of 3 (the ‘reproductive number) – for comparison, measles has an infection rate of between 14 and 18. Containment has to be the Chinese priority until they really understand the virus better – the airlines are being prudent in reducing/cancelling their scheduling.
Wouldn’t the average infection rate have to be less than 1 for every disease? If the infection rate were 2, we would all eventually have the flu or other disease all the time.
It is premature to suggest any mortality rate based in the numbers I have seen. You would have to assume all the known cases that haven’t died are going to survive. On the flip side, you also have to assume there are some mild unreported cases. Bottom line, until the WHO or CDC or some other similar agency states a figure, we don’t know.
Good time to be doing routine maintenance on airliners flying to China!
Given that this is now about the third major global disease outbreak that has originated in China and is related to the close interaction of humans and wild animals, China doesn’t want to be blamed for exporting another health care disaster to the world. Indications are that the impact in Wuhan is much worse than many think; no other country could cut off a portion of their country from the world but it might be effective in slowing the spread of the disease.
I believe I read that China is prohibiting group travel ex-China which should cause a lot of demand to be eliminated, even from parts of the country that aren’t as impacted as those areas around Wuhan.
Most western airlines will take a hit but some capacity that wasn’t performing well financially will also come out. China has recently admitted that its airlines lose billions of dollars per year on international flights. Non-Chinese Asian airlines will feel an impact but perhaps not as bad as Chinese airlines. Weaker Asian airlines might fail. This will be a big reset button for Asia aviation.
American and United will gain some extra capacity for Spring Break to offset the MAX grounding.
For many reasons, we can hope and pray the Chinese government can get a handle on this thing quickly.
I wonder what this is going to do to prices for these flights. Its been possible to get round trip flights to China and Hong Kong from SFO/LAX for ~$500 for the last couple years. Not on sale, but thats the normal price.
I am going to guess that if the flights stay cut, once things normalize, prices are going to double.
Probably takes too much schedule work at this point, but would be interesting if, assuming this drags on, United throws these “spare” aircraft on domestic trunk rlutes, mitigating missing MAXes a bit and causing less demand spill to, well, Delta. Same with American. We’re talking about several aircraft worth of capacity here.
Are any of these routes allocated by an aviation agreement between China and the other country? And if so, do the airlines get a waiver from the “use it or lose it” provisions?
Simon – I’m sure they will get a waiver for something like this.
Not blaming the coronavirus is playing semantical chicken and egg games. Of course the flight cancellations are happening because of the coronavirus. If the coronavirus didn’t exist, with a spread size and rate that it going to blow past SARS, the fear to travel to China wouldn’t exist. You can’t separate the two. They are perpetually entangled.
Now perspective is everything. The yearly flu infects more people and (maybe) kills more people than the coronavirus will but nobody is going to drop a flight because the flu virus is running around some country. But because we have become acclimated to having a yearly flu season we discount influenza flight risk whereas because the coronavirus is something new, we treat it with heightened urgency.
That everyones first question to the issue of a potentially catastrophic worldwide plague is “but what’s this gonna cost us”? tells me pretty much all I need to know where peoples heads are.
Hint: up their asses.
Overreaction or not. Millions if not billions of lives isn’t something we should be gambling on. But….you know….business.
At least things are being done now before it becomes a full blown epidemic and cancellations come to late to control this virus, AA is still operating its 3 flights to China with no plans to change that right now
AA has 4 daily flights to China (not including Hong Kong) and has cancelled 2 of them – the ones from LAX. DFW continues to fly, surprisingly.
I forgot to add DFW on the 3 flights to China, LAX has already made changes
I know someone who doesn’t even want to touch anything made in China at a store. She thinks if she does, she’ll get the virus.
I think my eyes got whiplash from rolling o hard and fast over that one.
Yes, the reactions of the ignorant. I just read of some who are avoiding Corona beer for fear of getting the virus. Might be a good time to stock up.
I would suspect airlines are definitely using this as a way to get some excess capacity out of the market, without being too upsetting to the Chinese Government and equally as importantly their corporate clients.
TPAC is dramatically over capacity from the airline’s perspective. When one can fly from BOS to SIN leaving tomorrow for $639 round trip (just looked on Expedia) there is too much capacity to support fares that make flying that far profitable.
Part of it is for TATL airlines can fly narrow-bodies for a lot of East Coast to Western Europe flights. For TPAC you have to have a wide-body. And so many countries flag carriers have non-stop flights to the US for seemingly national pride issues, that airlines will take any excuse to cut bait one some what have to be money losing routes.
Saying the due to the “significant decline in demand for travel to China” line was the smartest and safest statement American and United could have made because it avoids or lessens any potential political anger the Chinese government might have with such a decision. It’s all politics.