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Friday, 31 January 2020

Airlines may fold in the wake of coronavirus

Qantas CEO Alan Joyce: "It's survival of the fittest"
The continuing coronavirus crisis could spell doom for some of the less financially secure airlines in Asia.

A prolonged outbreak could send some carriers with paper-thin margins spiralling into debt from which they may not recover, Travel Mole reported.

The outbreak, which originated in the Chinese city Wuhan, has claimed 170 lives. Total infections have soared past 7,700 in China, surpassing the country’s official number from the 2003 SARS epidemic.

Qantas group CEO Alan Joyce (right) said there are many airlines with heavy exposure to the China market that could suffer.

"A lot of airlines may not be able to keep some of these operations going. It's survival of the fittest," Joyce told Fortune Magazine.

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

Joyce said it is still too early to tell what the full impact will be.

"When we look at what happened around SARS, it impacted us by $55 million back in 2003. It meant we did cut back on some international capacity but it rebounded very fast."

Overall, SARS cost the global economy about US$40 billion, but the China travel market has grown about eight times as big since then.

The current crisis has heavily affected other tourism-reliant sectors such as hotels and retail, as well as the lucrative Macao gaming market.

There are now substantially more low-cost carriers which typically operate on thin margins, and many of these have gone all-in on the fast-growing China market.

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