SARS has already had a devastating effect on traffic across the Asia-Pacific region and the cost is still being counted, with little prospect of any immediate recovery. However, crisis may help prove the strength of the region's carriers.
For an airline industry already struggling with the fall-out of war and step reduction in demand, the advent of SARS has assumed the proportions of a biblical plague. At a stroke it extinguished the one bright spot for air transport as Asia-Pacific. The region was not, after all, immune from the unexpected shocks that have rocked the rest of the world. The immediate cost is still being counted, but it is worth asking in what shape the region is likely to emerge once the firefighting ends?
The extent of the devastation is hard to overstate. The threat of disease and travel advisories have together proved more effective in destroying traffic even than terrorism or war, at least for those at the eye of the storm. That is where Hong Kong has sat. It was here that SARS first arrived after breaking out from the southern Chinese mainland in February. By mid-March the World Health Organisation (WHO) issued its first advisory. By April traffic had outright collapsed. Dragonair, which relies almost exclusively on its routes through to the mainland, saw traffic dive by close to 77% in the month. Cathay Pacific also suffered severe pain as traffic dived by nearly 60%. The big two mainland Chinese carriers - China Southern and China Eastern Airlines - also saw traffic fall by around 40% in April.
The pain for air travel has spread across much of Asia-Pacific as fast as, if not faster, than SARS itself. In many markets tourism all but collapsed during April and May. Even though it has not been at the centre of the epidemic Thailand reported a 50% collapse in tourism for April. In China itself, officials say that some of its tourist markets have seen visitors fall by up to 80%, while in Singapore visitors were still down by 75%in the first half of May. Singapore Airlines (SIA) has already reported a 50% drop in passenger numbers for April and more figures continue to emerge as others report for the month. Notably some of the largest falls both in China and beyond have come from the staple trunk routes within Asia.
It is possible that the worst of the epidemic has passed. Health authorities tentatively suggest that the epidemic may finally be showing signs of being contained and by May some travel advisories were hesitantly being lifted. Certainly the immediate panic that accompanied the initial outbreak in the world media appears to be subsiding.
However, in the words of Richard Stirland, director general of the Association of Asia Pacific Airlines (AAPA) for air transport the crisis is far from over. Borrowing from Winston Churchill's caution over news of an early victory, he suggests that tentative news of containment marks "merely the end of the beginning". He points out that in May, AAPA members were still cancelling over 1,150 flights per week, with nearly half of those coming from Cathay, Dragonair and SIA alone.
No-one is predicting a swift snap back in traffic. SIA calls the near-term outlook "dismal" with no expectation of "any significant improvement" through to July. It hints at a substantial loss for the June quarter. Cathay too warns that when recovery comes, (and May bookings were as bleak as those in April) it will be not be "either quick or strong".
Even allowing for a gradually easing of the SARS epidemic, severe damage has already been done. On a rough calculation, the worst affected airlines could find themselves going into the second half of the year having already lost close 8-10% of their annual passenger traffic and with little immediate prospect of being able to make up the deficit. However, there has been one high note throughout the SARS crisis and that is the relative stability of the cargo market. Some passenger flights appear to have been flown near-empty simply to provide belly capacity. There is even evidence that the mass cancellation of flights has buoyed up freight yields.
In the longer term, SARS seems unlikely to have done any enduring damage to Asia's underlying growth potential. Once confidence returns, the traffic deficit should be made up in short order. If anything, perhaps, the region's industry could emerge stronger and wiser from the SARS crisis. It has certainly forced airlines to get lean quickly and has taught some useful lessons about staying flexible.
As a matter of necessity, the response to this crisis has been faster, more decisive, and arguably more co-ordinated than in the past. Under the auspices of the AAPA, carriers quickly came together to plan a joint approach to tackling the public panic about flying - already rehearsed in the wake of 11 September. The AAPA sounded more confident and united in calling for concessions from airports and action by governments. If one legacy from SARS is indeed to help Asia-Pacific's carriers find a stronger voice and a more decisive presence on the world stage then the crisis will have not been entirely destructive.
Source: Airline Business
