The airline business is tricky, but some carriers see opportunity in the Coronavirus to reduce their losses and save face when routes haven’t gone as planned.
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Coronavirus
For the last couple weeks, 2019 Novel Coronavirus has consumed the media. I’m not a doctor nor a scientist so do not take my assessment of the virus as anything other than a curious observer. The flu-like virus can be deadly for vulnerable patients infected, especially the very young or very old.
Similar to SARS, the concern for China (specifically Wuhan) where the virus first emanated, close proximity to millions of people can make a small problem enormous. The Lunar New Year (heavily travelled in China) also made the timing of this virus particularly disadvantageous.
For what it’s worth, the symptoms seem similar to a common cold (sore throat, headache, fever, sneezing, etc.) and for those who receive treatment, it’s not life-threatening. What remains so jarring about this particular strain is that it is highly contagious.
China-US Aviation Rules
China and the US have strict rules for flights between the two countries. Opportunities are limited and carriers cannot freely add routes but must follow guidelines:
- Slot-restricted airports (Shanghai and Beijing) require specific awards
- Route awards usually coincide with a one-for-one Chinese and American carrier
- Route must run for extended period of time
- Awarded routes have to be operated or relinquished
For example, American Airlines petitioned to gain a Delta route that had been suspended because American had competed for the same route and lost, yet Delta was not actually flying it. Ultimately, American was awarded the route.
Some of the restrictions between the two countries come down to limitations at the airports (until Beijing’s new airport opened) much like landing slot restrictions at Tokyo Haneda are doled out each year. Another factor is China’s limited approved air traffic network which allows just 20% of the country to be traversed by air. James Fallows covered this in his excellent book, China Airborne.
Deep, Lasting Cuts Without Consequence
American Airlines has been perhaps the most vocal about how costly some of their flights to China have been. The carriers wanted to have a tentpole for future growth and were willing to make an investment to secure their long term position.
Some of the routes are premium class heavy and do very well. United’s laudable Asian-network flights from San Francisco and lucrative contracts with tech firms filled large aircraft with an average of 50 business class seats daily on the Shanghai route alone.
However, this time of year is always bad for flights to China. Lunar New Year hosts a lot of domestic travel within China, but not necessarily overseas traffic. Flights can be purchased for less than $400 roundtrip from just about anywhere in the US to just about anywhere in China, business class for less than $2,000 typically.
But airlines can’t drop flights in frequency or reduce them to seasonal per the agreements. They must continue to fly big aircraft that they will need the rest of the year and for which their approval was granted at the same consistency that won them the award, usually daily flights.
This week, American and United both announced they will be suspending their service to China due to “lower demand.” Delta, the airline living in the future, has suspended flights all the way to May, a bold move considering that this issue may be short-lived and one that goes well beyond its US peers.
This appears, at least in the case of Delta, to be more than precaution but rather a way to ensure profitability for the routes when they garner the most revenue. And they can get away with it right now because of the fear of Coronavirus consequence-free. In fact, neither government can claim that Delta nor United/American are acting in any way other than an abundance of caution because the problem appears to be uncontained for the moment.
Conclusion
The 2019 Novel Coronavirus is certainly a threat to vulnerable citizens and its infection rate is alarming, especially considering the epicenter of the virus. However, the US carriers and especially Delta, have taken this as a convenient opportunity to reduce losses on their China flights when they would otherwise rather not fly the routes anyway.
What do you think? Are the US carriers taking advantage of the Corononavirus to reduce losses while appearing cautious? Do you think their concern is genuine? How long should carriers be allowed to suspend flights to China without losing their rights?
“. I’m not a doctor nor a scientist”
This has never stopped anyone from acting like an expert though. So here are the expert opinions.
Global warming is fake, christ was real, mary did have an immaculate conception and didn’t really get pregnant by cheating on Joe, jack or whatever his name was, even though three rich dudes that neither knew showed up with gifts on the child’s birth.
You can show your love for republicans by punching them in the face. And if the victim is a republican who must find the defendant not guilty without even listening to any witnesses because it is not our place to judge. Let the lord judge who is guilty.
Amen.
Not sure what any of that has to do with any of this.
@debit non-sequitur much?
“…and for those who receive treatment, it’s not life-threatening.” Sorry but not true. There is no “cure.” Yes, supportive treatment for those hospitalized but many of those have a very rough time and some die. For many the symptoms will be a bad case of flu but for a significant proportion that’s not true.
Absolutely correct. The prognosis appears to relate to co-existing conditions , and has very little to do with ‘treatment’ , such as it is. Even so, some people recover rapidly, others die just as quickly without apparent ‘rhyme or reason’, regardless of health status at the time of infection.
The piece in today’s NYT..a paper not given to hyperbole or hysteria…canvasses the strong likelihood of a pandemic, now unable to be controlled, despite the effective closing of borders.
So turning to your central theme yes I tend to agree that the flight reductions are being driven more by economics than virus fears.
I suspect that loads on China flights which you had noted were already low had dropped to near zero especially given the CDC recommendation to avoid all but essential travel to China. I’m sure another factor was pressure from the unions as who would want to work one of those flights right now. I sure wouldn’t.
It’s going to be especially interesting to see how long it takes for all those cancelled flights to be resumed.
I’m interested in what the cargo pilots will do in the coming days. I rely on FedEx cargo from Hong Kong once a month and am getting a bit worried. Little has been discussed as to what their pilots are saying.
Couldn’t FedEx and UPS just send larger crews and sleep onboard without ever having to leave the aircraft?
Pretty doubtful the union would go for that. The operations in Hong Kong are huge though and they have an existing base there of 767 pilots. HKG at this point could end up being the only cargo center running in the region so it’s hard to imagine the fallout if it has to close due to pilots refusing to fly. Or not able to enter the U.S. should the restrictions extend to Hong Kong.
While everyone talks about the passenger flights I would venture to say that if cargo flights get shut down the economic repercussions will be far greater.
It won’t be long before demonstrators will be back at HKG, in numbers, as a consequence of the ‘government’ declining to close the border with China. Carrie Lam has led with her chin yet again ( aided and abetted this time by the brown-nosing, shoe-shining lapdog from the WHO.
If global warming is a risk companies need to account for having a supply chain in china is a HUGE RISK that company’s stock prices need to reflect.
This is an under priced risk.
China has shown it is efficient but unreliable. Two pandemic scares in two decades is not a mitigated risk supply chain.
I think saying it’s not life threatening if you receive treatment is not correct. It is certainly less so but still with dangers. There are a number of cases of people getting treatment that died.
Fair but I’m not sure it’s pandemic-level. Then again, I am not a doctor nor an epidemiologist as stated. The Thai seem to have had success using antiretroviral medication to treat serious cases for a full cure.
For US carriers it may be not the worst inconvenience to have to cancel these flights. But for others, for example BA but especially LHG and AFKL this will hugely hurt their annual performance. Performance even this time of year is generally not too bad either with Chinese tour groups inbound to Europe. This will massively leave a mark if this drags on for the first half of the year.
Absolutely agreed, but Delta pushing out all China flights until May is a savings tool, not solely related to this, I do not think. Conveniently motivated.
The WHO website says people with certain pre-existing conditions – they cite asthma, diabetes, and heart disease – could be particularly vulnerable to serious complications if infected. 25 million Americans have asthma, 30 million Americans have diabetes, heart disease is the cause of 1 in 4 deaths in the U.S. each year.
you really need to stop posting on medical issues and saying they aren’t serious. You are correct, you are not a doctor, you dont know and shouldn’t give people a sense one way or the other. Saying you arent a doctor, and then following that up with whatever you want to say isnt a valid excuse.
What if an airline is using coronavirus to claim falsely that there are no vacancies in hotels, due to the outbreak, when in all actually there are plenty of available rooms? This includes hotels that contract with the airline. Of course, this deals with a cancellation of a flight and no other flight is available for 19 hrs. The flight is also late in the evening at 11 pm, the last domestic outgoing flight. Is this legal?