DOW JONES25,766.64-1190.95 -4.42%
S&P 5002,978.76-137.63 -4.42%
NASDAQ8,566.48-414.30 -4.61%

Coronavirus Spread Creates Uncertainty For Airlines

How the novel coronavirus outbreak in China could impact the aviation sector and global economy is unclear at this stage, but airlines and airports are taking precautions.

Benzinga · 01/27/2020 15:40

How the novel coronavirus outbreak in China could impact the aviation sector and global economy is unclear at this stage, but airlines and airports are taking precautions.

Authorities in China have imposed travel restrictions in Wuhan and 10 other cities in advance of Saturday's Chinese or Lunar New Year, a weeklong national holiday. Twenty-six people have died and more than 900 people in China and elsewhere are known to be infected, according to public health officials.

The Centers for Disease Control and Prevention (CDC) said Friday that a second person in the U.S., a woman in Chicago, is infected with 2019-nCoV, as the coronavirus is officially known. The woman, who is in her 60s, returned to the U.S. from Wuhan on Jan. 13 and started experiencing symptoms a few days later. As of midday Friday, 63 patients were under investigation in 22 states, with 11 testing negative and two testing positive.

Cases also have been reported in Thailand, South Korea, Japan, Singapore and France.

The CDC is conducting public health screenings at five U.S. airports: San Francisco, New York Kennedy, Los Angeles, Chicago O'Hare and Atlanta. CDC officials said they are evaluating continued screening in light of the travel restrictions imposed by China. About 2,000 people have been screened at the airports and only one sent for further testing, CDC said. Neither of the two people with confirmed cases of the coronavirus had symptoms while they were traveling.

Other countries also are taking action. Singapore has implemented temperature screening for all passengers arriving from China. Taiwan's EVA Air is requiring crew members on all its flights to China, Hong Kong and Macau to wear sanitary masks and to use gloves when they collect food trays from passengers

A spokesperson for Airlines for America, a U.S. airline trade association, said it is closely monitoring developments but that U.S. carrier operations have not been impacted so far. The International Air Transport Association also said it is monitoring developments and both are looking to CDC and the World Health Organization for guidance.

The WHO has convened its emergency committee but has not yet declared a "public health emergency of international concern," which could then trigger a coordinated international response.

The CDC is recommending that travelers avoid all nonessential travel to Wuhan, but otherwise is urging travelers to other parts of China to practice usual precautions, such as avoiding contact with sick people, avoiding animals and animal markets and washing hands with soap and water for at least 20 seconds.

During a press briefing, CDC officials said it was too early to say how the coronavirus compares with the deadly Severe Acute Respiratory Syndrome (SARS), which killed 774 and sickened nearly 8,100 in its 2003 outbreak.

SARS had a significant impact on international aviation. At the height of the outbreak, Asia Pacific airline traffic fell 35% from precrisis levels, according to IATA data, and took months to recover. Overall, airlines in the region lost 8% of their annual traffic and $6 billion in revenues.

"The experience of SARS demonstrates that a loss of confidence and uncertainty can lead to a chain reaction in key sectors, such as travel and tourism, which would impose heavy economic damage," IATA said in 2006.

This week S&P Global Platts and others said that the coronavirus could put downward pressure on oil demand and prices, at least in the short term.

A decline in jet fuel prices could benefit air cargo operators and airlines, but anything that impacts global trade or the economy will have a negative effect on the industry.

SARS impacted airline traffic more than any other health crisis in recent years as shown above by the decline in revenue passenger kilometers. (Source: IATA Economics)

Image by PublicDomainPictures from Pixabay