United Airlines slashes Asia flights as coronavirus spreads

United Airlines jet on runway

In a further concession to the spread of the coronavirus beyond China, United Airlines (NASDAQ: UAL) on Friday said it is reducing flights to  Tokyo and Osaka, Japan, Singapore and South Korea and extending flight suspensions to China through April 30.

Meanwhile, logistics companies are warning customers that freight capacity out of South Korea is tight and the Asian airfreight market is increasingly volatile, with spot and freighter rates expected to climb as airlines pull service out of the region.

United’s move comes as the number of confirmed coronavirus cases around the world has escalated. Several airlines this week have adjusted schedules unrelated to China and began efforts to blunt the expected loss in business as people refrain from travel to avoid exposure to the disease. There are more than 80,000 confirmed cases of coronavirus worldwide, the vast majority still in China, and nearly 2,800 deaths.

The International Air Transport Association last week estimated airlines would take in $29.3 billion less in revenue this year because of the travel downturn associated with the coronavirus. Lost revenue and profits are likely to go higher as the outbreak gathers steam and becomes a global problem.

United’s latest schedule adjustments related to the coronavirus are as follows:

  • Los Angeles and Houston to Tokyo Narita cancelled March 8-24
  • Chicago-Tokyo Narita cancelled March 8-27, then switches to Tokyo-Haneda
  • Newark-Tokyo Narita reduced to 5x weekly for April (from daily)
  • Honolulu-Tokyo Narita down-gauged from 777-200 to 787-8 for April
  • San Francisco-Kansai International Airport (Osaka) reduced to 5x weekly in April (from daily)
  • San Francisco-Singapore reduced to 1x daily for March 8-April 24 (from 2x daily)
  • San Francisco-Seoul, South Korea reduced to 3x weekly for March 8-April 30 (from 1x daily in March and 2x daily in April)
  • San Francisco-Taiwan down-gauged from 777-300 to 787-9 for March and April.

On February 27, Hawaiian Airlines announced it is suspending its five-times weekly nonstop service between Honolulu and Incheon International Airport in Seoul beginning March 2 through April 30 due to the spike in coronavirus cases in South Korea. 

There were 427 new confirmed cases of the COVID-19 virus in South Korea on Thursday 

On February 25 Delta said it is reducing the number of weekly flights between the U.S. and Seoul and delaying the start of service to Manila, Philippines. 

The curtailed passenger capacity also reduces capacity for shippers that fly their cargo in the belly of passenger aircraft.

The coronavirus is sending airline stocks down, along with broader market indices, as fears grow of mass quarantines and reduced business activity. Many large companies are instituting travel bans for their employees and some large industry conferences are being cancelled. Facebook just cancelled its largest global conference and instead will host smaller local events. And the organizers of the Geneva International Motor Show on Friday canceled the big auto event scheduled to begin next week.

The Global Business Travelers Association says about two-thirds of its members have canceled meetings, events and conferences – mostly in China and the Asia-Pacific region – due to health concerns. 

German logistics conglomerate Deutsche Post DHL Group posted fourth quarter results Friday and said the coronavirus has affected its DHL Express and Global Forwarding divisions more than its ecommerce and supply chain divisions because those divisions are more involved in cross-border trade in and out of China. Group-wide the negative impact of the outbreak on earnings before interest and taxes was 60 million to 70 million euros ($65.7 million to 76.7 million) in February.

The company said it can’t predict the impact of the outbreak on full-year results, but added that “should the macroeconomic situation normalize again, there could also be positive effects for logistics companies. In case of a longer duration or a worsening of the current situation over the coming months, the negative impacts for the Group are likely to outweigh the positives. The concrete earnings impact can only be assessed after a normalization of the situation.”

SEKO Logistics said in a client note that airfreight demand out of Korea to Europe and the U.S. is still expected to increase, adding to capacity issues. The freight forwarder urged companies to book space ahead of time to ensure shipments can be delivered with minimal disruption.