Wednesday , 26 February 2020
Home >> Analysis and Features >> Are Airlines Overreacting to the Coronavirus?
Beijing Daxing Airport. Airport Image.

Are Airlines Overreacting to the Coronavirus?

Earlier this week, the US government began implementing new rules for travel from China in the wake of the coronavirus outbreak. The US has already issued a level 4 advisory urging residents to avoid outbound travel to China. Additionally, flights from China will be contained to seven airports (New York JFK, Chicago O’Hare, San Francisco, Seattle, Atlanta, Honolulu, and Los Angeles). Arriving passengers will be screened at the airport, and if they do not show symptoms will be rebooked to their final destination and asked to self-quarantine inside their homes.

Since the coronavirus epidemic was made public in mid-January, the response from airlines and governments around the world has been swift. Several foreign governments have taken a similar approach to travellers from China as the US has, ramping up screening and quarantine efforts.

Airlines have also made direct moves, with widespread international flight cancellations at every Chinese airport. Wuhan Airport is a ghost town, but the impact of cancellations is much more widespread. US airlines have canceled their flights to and from China through March (and April in the case of Delta), and even Hainan Airlines has cut 65 international routes from other Chinese airports until the end of March. You can get a complete picture of the carnage by clicking through the last few days of market updates from the Airline Route blog

While it’s tempting to view these cuts as a public health intervention, the bigger driver is the broader collapse in demand for both inbound and outbound passengers, as Brett over at the Cranky Flier noted last week. In all likelihood, the passenger panic over the potential of coronavirus infection dwarfs the actual impact of the disease itself. More than 17,000 people on the Chinese mainland have been diagnosed with coronavirus and more than 360 people have died as of Monday, February 3.

Those numbers are genuinely worrisome, as are the R0 (the rate at which one person spreads the infection) estimates of between 2 and 3.5. This number is higher than that of the seasonal flu, which has an R0 of ~1.3, but lower than that of SARS (which had an R0 of 2-5 in 2003). As a point of comparison, SARS infected ~9,000 people worldwide with ~900 deaths (e.g. more than 5x the mortality rate) while the seasonal flu infects between 40-100 million people every month and kills 30-50,000. And similar to the seasonal flu, the overwhelming majority of deaths from the latest coronavirus have occurred amongst elderly patients.

With this backdrop, the fall in demand has arguably been disproportionate to the actual numbers in the outbreak. For example in China, total transport volume during the 10-day Lunar New Year (akin to the period between Christmas and New Years Day in the United States) fell by 73% or 190 million travellers. The majority of the cases are concentrated on Wuhan and Hubei province in Southeastern China, which are now under quarantine.

India’s reaction to the coronavirus

The Ministry of Health, India mandated health screening of passengers flying in from China on the 17th of January 2020.

India issued a travel advisory on the 3rd of February urging citizens to refrain from travelling to China. Simultaneously, the e-visa facility for Chinese passport holders was temporarily suspended. Any e-Visa’s issued to Chinese nationals have been temporarily suspended and the facility of submitting physical visa applications from China also suspended.

All passengers arriving on flights from China, Hong Kong, Thailand and Singapore to India are being mandatorily screened by the Airport Health officers for symptoms of corona virus. For flights arriving from anywhere else in the world, announcements are being made to advise pax to self-declare travel to China within the last 14 days (of arrival).

Upon self – declaration, passengers are being sent to the Airport Health Officers for screening. Immigration too, is keeping an active eye on all passengers and checking their passports for visits to China (thereby causing considerable delays at immigration). If immigration comes across a passenger who has been to China within the last 14 days and has not declared that fact, they are being sent for mandatory screening.

Are airlines overreacting to coronavirus?

Those are the facts on the ground – there is a respiratory illness that is spreading at a similar rate as SARS, is one-fifth as deadly, and is mostly lethal for the elderly.

The city and province that are the epicentre of the infection have been quarantined, and the number of cases elsewhere in China is much, much smaller (especially as a proportion of passengers). At the same time, the disease spreads through the air (as opposed to something like Ebola which requires contact with bodily fluid), and has an incubation period up to 14 days long.

Some patients have spread the virus prior to symptoms, and scientists say that we are likely a year away from having an effective vaccine for coronavirus. For context, the SARS outbreak lasted for roughly nine months (November 2002 to July 2003), so there may still be further adverse developments.

Between the very real public health risks that continuing to allow unfettered travel out of China would have posed and the general collapse in demand, I will take the boring position here and say that the response from airlines has more or less been appropriate. China flights have been pared back for the next couple of months, and as with the 737 MAX situation, I would expect rolling “blackouts” to continue until the coronavirus is fully under control. At the same time, flight capacity has been more or less maintained throughout the remainder of the network. This lines up with the reality that in developed countries with strong health care systems and healthy populations, coronavirus is a relatively minor threat.

This is rightly a secondary concern, but long haul flights from the US (and Europe) to China have consistently been the most unprofitable routes for western airlines in the last 3-4 years. The breakneck expansion from Chinese carriers (on which they lose several billion dollars per year) has collapsed yields and fares on itineraries to and from China.

Chinese carriers also competed aggressively on connecting itineraries from the West to Asia-Pacific, so fares from the US and Europe to Asia and Australia are likely to rise over the next 4-6 months (unless you’re willing to fly via China). So if you’re eyeing an Asian trip in the summer, you’re likely better off booking now.

About Vinay Bhaskara

Check Also

SpiceJet Bombardier Q400 Dash 8 VT-SUB lands at Kempegowda airport Bangalore. Photo by Vedant Agarwal. All rights reserved.

SpiceJet Q3FY20 results analysis: Has rapid expansion hurt the airline?

February 14th saw SpiceJet report its third-quarter results. The airline reported a profit of INR …

IndiGo first A320neo VT-ITC touches down at New Delhi's IGI airport after a non-stop flight from Toulouse, France

Indigo Q3FY20 results analysis

Monday, January 27th was quite a newsday for Indian aviation. In what is becoming a …