Singapore Airlines Ltd, Asiana Airlines Inc and other Asian carriers are slashing flights to China, just months after adding planes on routes to the country, as a deadly virus prompts travelers to cancel visits to the nation.
Singapore Air suspended all flights to Guangzhou in southern China, the world's fastest growing major economy, and reduced 40 percent of services to Beijing and Shanghai, three months after announcing plans to add capacity to the cities. South Korea's Asiana cut one-quarter of its flights to Chinese cities.
Asian carriers last year raised capacity to China, where companies such as Toyota Motor Co are increasing investment and where rising wealth has encouraged more Chinese to holiday overseas. Instead of being a buffer against the war in Iraq, China is now putting profitability for airlines in jeopardy.
"The scare is putting a dent in our profit," Asiana spokesman Kim Hyung-jin said. "It's ironic how last year China flights helped increase profit and now it's a concern."
Severe acute respiratory syndrome, known as SARS, has killed at least 144 people worldwide and infected almost 3,200 more.
China and Hong Kong account for about 80 percent of the victims.
Asian carriers canceled more than 500 weekly flights the last month in response.
"Intra-Asian traffic was supposed to be the silver lining, but that's gone," said Mark Tan, an investment analyst at UOB Asset Management which manages the equivalent of US$6.8 billion and isn't buying airlines stock. "China is the hotbed for the virus and nobody knows how serious it is."
Since mid-March, the Bloomberg Asian Pacific Airlines Index of 17 carriers fell 7 percent, while comparable indexes for European carriers rose 18 percent and those from the US gained 12 percent. Asian carriers had previously outperformed their peers by as much as 18 percent this year.
Singapore Air's shares slumped to a 17-month low yesterday, while Asiana's shares are down two-fifths this year. Korean Air's stock has shed more than a quarter. Japan Air shares are close to their lowest since they started traded in October.
"The impact may be bigger than Sept. 11 was for Asian carriers," said Christian Dangerfield, who helps to manage US$1 billion Asian investments at AIB Govett and was referring to the terrorist attacks in the US which led to a slump in air travel.
Taiwanese carriers asked for government assistance after the number of passengers on their planes fell on some routes.
The International Air Transport Association last year forecast Chinese air traffic will increase by almost 10 percent annually between last year and 2006, compared with a global average of 4.3 percent. China's economy expanded 8 percent last year and the government set a target of 7 percent annual growth between 2001 and 2005.
The Japanese government is advising its citizens against traveling to Guangdong and Shanxi provinces and to Hong Kong and Macao. Malaysia barred entry to Chinese citizens and Singapore said it will cancel work permits of overseas workers who travel to China.
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