China flights suspended over Wuhan virus, cargo begins taking a hit

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The death toll from the Wuhan coronavirus continues slowly climbing, passing 130 as of today with China saying its patient count is now over 6,000, as airlines have begun cancelling flights to China hitting belly cargo capacity.

Researchers say the actual number of cases in Wuhan could be as many as 25,000 based on an analysis of the population of the city, the number of cases detected outside of China and the number of people who travel from Wuhan to other areas. At least 18 countries have now confirmed coronavirus cases including three countries and territories reporting their first cases, including: Tibet, Canada and the United Arab Emirates.

Among those carriers that have suspended their China services include: Lufthansa, Air Tanzania, American Airlines, British Airways, Finnair, United Airlines, Air Canada, Lion Air, Air Seoul, Air India, with others such as Korean Air and Cathay Pacific progressively scaling back capacity.

Asia Wuhan Virus
Source: New York Times

As widebody capacity is increasingly pulled from the market, significant belly cargo capacity will be lost. That this crisis has happened during the Chinese Lunar New Year period where cargo capacity demand is typically slack, helps offset the impact, but typically there is an uptick as volumes recover following the holiday.

China’s central government has extended the Lunar New Year holiday until 3 February in response to the coronavirus epidemic. Businesses in the Guangdong province, which includes Shanghai, have been ordered to remain closed through to 10 February. Jiangxi Province, Shandong Province, and Anhui Province are delaying resumption of work for non-essential enterprises to 9 February and Hubei Province – where Wuhan is located – announced that enterprises in the province will be closed until 13 February.

Global Wuhan Virus
Source: New York Times

“We do have some suppliers in the Wuhan area,” Apple CEO Tim Cook said Tuesday during the company’s first quarter earnings call. “All of the suppliers there are alternate sources and we’re obviously working on mitigation plans to make up any expected production loss … With respect to supply sources that are outside the Wuhan area, the impact is less clear at this time.”

Confirmed cases of the virus are rising in the Henan province, where Apple’s key Zhengzhou facility is located. According to IDC data, the province accounted for a quarter of China’s smartphone exports in 2019. The virus crisis comes as the company has reportedly been increasing production to meet higher-than-anticipated iPhone 11 demand, which was released in late 2019.

“The concern is of the impact that the situation could have on China’s economy and the knock on that will have on things like air cargo,” says All Nippon Airways (ANA) executive vice president Ichiro Fukuzawa speaking to media in Tokyo on Thursday as the airline released its earnings for the three months ended 31 December.

A Hong Kong freight forwarder told AsiaCargoBuzz.com that the impact on the supply chain will start to be felt more sharply by mid-February if capacity remains suspended. “Assuming factories reopen following Chinese New Year, which at this moment is not clear, the market needs that capacity as volumes build. Supply chains carrying key components and raw materials for these factories could also be hit. If carriers decide to curtail freighter operations out of concern for their crew, this could stifle what was looking like a small, but steady air freight recovery,” the forwarder warns.

Although the city and airport of the quarantined city of Wuhan with 11 million population, at the epicentre of the Wuhan, are locked down, other major international airports, such as Shanghai, Beijing and Hong Kong remain open, but this could change should the the crisis deepen. Chinese news reported that SF Airlines flew two B757F aircraft into Wuhan from Shenzhen (SZX) and Hangzhou (HGH) carrying medical supplies to the city.

According to the Civil Aviation Administration of China (CAAC), Wuhan Tianhe Airport (WUH) was the country’s sixteenth busiest cargo airport, handling around 221,576 tonnes per year. The city has a large industrial zone which includes high tech, automotive and pharma production.

It’s also not clear that freighters will continue service to key parts of China due to the virus and if they suspend services they will be deployed elsewhere until the situation improves. Equally unclear is whether the Chinese government will allow factories to reopen following the New Year holiday. Much will depend on how the situation develops over the coming days.

This latest virus is being likened to the severe acute respiratory syndrome (SARS), which killed 774 and sickened nearly 8,100 in 2003 – except experts are warning it will likely be worse. At the height of the SARS outbreak, Asia Pacific travel fell 35 per cent from pre-crisis levels, according to the International Air Transport Association, and it took months to recover. Overall, airlines in the region lost 8.0 per cent of their annual traffic and more than USD 6.0 billion in revenue.

Summary
Wuhan coronavirus threatens bad news for cargo
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Wuhan coronavirus threatens bad news for cargo
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The death toll from the Wuhan coronavirus continues slowly climbing, passing 130 as of today with China saying its patient count is now over 6,000, as airlines have begun cancelling flights to China hitting belly cargo.
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AsiaCargoBuzz.com
AsiaCargoBuzz.com
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