Airlines versus coronavirus: A bruising and lopsided battle

The novel coronavirus has broadsided the aviation industry, particularly at its epicenter in China. Tens of thousands of flights in and out of the country have been canceled or removed from schedules completely as airlines cut capacity to try to survive the crisis.

Big players like Cathay Pacific Airways Ltd., China Southern Airlines Co. and Hainan Airlines Holding Co. have put staff on unpaid leave, while embattled Hong Kong Airlines Ltd. is axing 400 jobs. Those with weak balance sheets are likely to face a cash crunch as dwindling passenger loads may not cover high fixed costs, though state-owned airlines should get some financial support, Bloomberg Intelligence analysts James Teo and Chris Muckensturm said.

The following charts show how the virus has impacted the industry.

Canceled Flights

Nearly 86,000 domestic and international flights in and out of China were canceled from Jan. 23 through Feb. 11, accounting for 34% of scheduled services, according to air-travel analytics company Cirium. The number of scheduled flights in the country has dropped by about 63% in less than three weeks.

China Exposure

Air Macau Co. and Cathay Dragon have the biggest proportion of their international route capacity exposed to the mainland China market, according to data from OAG Aviation Worldwide. They both have nearly 60% of available seats dedicated to serve cities in China.

Not So Lucky

China Southern has canceled nearly 22% of its scheduled flights, according to Cirium. Xiamen Airlines Co. and Lucky Air Co., also canceled more than 20% of their flights. China’s three biggest airlines slashed international seat capacity by between 60% and 80% from Jan. 20 to Feb. 10, leaving budget operator Spring Airlines Co. as the country’s largest international carrier as it only cut capacity by 6%, according to OAG Aviation’s John Grant.

Sharp Sell-Off

Airline stocks have been weighed down by the virus, with the Bloomberg Asia Pacific Airlines Index sliding 12% in the past month. The “Big Three”—Air China Ltd., China Southern and China Eastern Airlines Corp.—have all plunged at least 15% in Shanghai in that time. The only airline stock on the index to have risen in the past month is InterGlobe Aviation Ltd., the operator of India’s IndiGo Airlines, which has eked out a 1.4% gain.

What Next?

The International Air Transport Association has mapped out how major outbreaks in the past have affected airlines’ passenger traffic in the region, with the biggest hit coming from SARS in 2003. This coronavirus could have a greater impact: OAG’s Grant said the falling numbers now are “certainly some of the most dramatic” ever seen.