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Airlines bearing brunt of fast-growing virus, China flights curtailed

All News 16:23 January 29, 2020

By Choi Kyong-ae

SEOUL, Jan. 29 (Yonhap) -- South Korean airlines are beefing up preventive measures to minimize any fallout from the fast-spreading coronavirus on their businesses this year, industry sources said Wednesday.

The new coronavirus virus first appeared in the central Chinese city of Wuhan last month, and has sickened thousands and killed more than 100 in China. Cases have been detected as far as in the United States.

South Korea has reported four confirmed cases of the deadly virus, and the authorities have raised the country's infectious disease alert level one notch from yellow to orange, the third highest.

This photo taken Jan. 29, 2020, shows counters of travel agencies at Incheon International Airport, west of Seoul, amid the spreading Wuhan coronavirus. (Yonhap)

Among industries, the airline industry appears to bear the brunt of the new coronavirus on their earnings results in 2020 if the virus continues to spread across borders.

In South Korea, Korean Air Lines Co. was quick to respond to the severe acute respiratory syndrome-like virus and its possible effect on its business. SARS killed about 650 people in China and Hong Kong from 2002 to 2003.

Last week, the national flag carrier suspended most of its four flights a week to Wuhan by March 27. Its routes to Chinese cities, except for Wuhan, the epicenter of the virus outbreak, are operating for now.

"Customers who cancel or postpone their flights to China will be exempted from paying charges for cancellations or postponements by the end of March," a company spokeswoman said over the phone.

Most flight attendants are currently wearing masks while serving customers, with hand sanitizers and masks provided to all airline personnel and passengers at the airport, she said.

Korean Air said it will announce its plans to reorganize its flight schedules on Chinese routes Thursday.

Asiana Airlines Inc., the country's second-biggest airline, said Wednesday it will suspend routes from Incheon to less popular Chinese cities next month -- Gulin and Haikou starting Feb. 1 and Changsha beginning Feb. 3.

In particular, Asiana is expected to post weak earnings results in the first quarter if demand on Chinese routes continues to decline due to the virus. Asiana earns nearly 20 percent of its sales from sales of flights to Chinese cities.

Analysts expect airlines will suffer a decline in sales in the first and second quarters as it will take some time for the virus to be contained.

"Airlines have been aggressive in developing alternative routes to offset lower demand on Japanese routes since July last year due to Japan's export curbs. But the virus has emerged as another headache for them to ride out," Yang Ji-hwan, an analyst at Daishin Securities Co., said by phone.

He expected airlines won't likely achieve a turnaround in the first half of 2020.

This photo taken on Jan. 29, 2020, shows passengers arriving at Incheon International Airport from Guangzhou amid fears of the spreading coronavirus. (Yonhap)

Airlines had expected recovering inbound travel demand on Chinese routes will help lead to an earnings turnaround this year but declining demand on the routes following the outbreak of the virus will serve as a major drag on the companies.

The number of passengers on Chinese routes jumped 14 percent to 18.4 million in 2019 from 16.1 million a year earlier, according to the transport ministry.

Travel demand from China remained weak following political tensions between Seoul and Beijing over the deployment of an advanced U.S. anti-missile system called THAAD in South Korea in 2017.

On top of the two full-service carriers, low-cost carriers have also suspended some of their flights to China or are considering halting further routes to the neighboring country in February.

"We are planning to gradually suspend six routes to Zhangjiajie from Incheon and other local airports starting today, and will take additional steps depending on developments in the spread of the virus," said a spokesman at Jeju Air Co., the country's biggest low-cost carrier.

Air Seoul Inc., a budget carrier unit of Asiana Airlines, on Tuesday suspended most of its flights to two Chinese cities -- Zhangjiajie and Linyi -- Wednesday for the time being.

On Wednesday, stocks in airlines outperformed the broader KOSPI index's 0.4 percent gain, as investors went bargain hunting.

Korean Air rose 0.6 percent to 23,850 won after plunging 6.7 percent the previous session, Asiana climbed 1.1 percent to 4,760 won after shedding 5.2 percent and Jeju Air gained 3.2 percent to 22,350 won after losing 7.7 percent.

kyongae.choi@yna.co.kr
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