Published April 28, 2009

Airlines feel chill as swine flu spreads

Struggling aviation industry keeps fingers crossed as lethal threat looms

By VEN SREENIVASAN

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(SINGAPORE) It's merely a precaution but Singapore is taking no chances with swine flu as it referred two cases to the Communicable Diseases Centre for further assessment. One is a local resident who displayed flu-like symptoms and had visited the United States while the other was an American who arrived at Changi Airport with higher than normal temperature that was detected by thermal scanners.

Taking no chances: Malaysian health officials at Kuala Lumpur International Airport yesterday checking the temperature of passengers arriving from Los Angeles through Taipei

Preliminary tests for Influenza A on both were negative.

Meanwhile, Hong Kong said that a 27-year-old woman suspected to be suffering from the flu was free of the virus.

But as the shadow of the swine flu grows longer, the question is being asked: Is this Severe Acute Respiratory Syndrome (Sars) Mark 2? Many in the aviation industry hope not.

Nevertheless, the outbreak of swine flu in Mexico and its subsequent - and seemingly rapid - spread to other parts of the world is rattling nerves in the already-troubled industry.

Not surprisingly, news of the flu sent airline stocks tumbling yesterday.

Singapore Airlines shares fell 48 cents or 4.5 per cent to a three-week low of $10.12.

Elsewhere in Asia-Pacific, Cathay Pacific shares shed 8 per cent to HK$8.42, while Qantas slid 4.1 per cent to A$1.90 and Korean Air Lines lost 7.4 per cent to 37,800 won.

In Europe, British Airways tumbled 17 per cent in early trading, while Air France was down almost 10 per cent.

Stock markets across the region fell as worried investors sold down.

Swine flu has so far caused 103 deaths in Mexico. It has spread to the US and Canada - and even as far as Israel and New Zealand.

Asia-Pacific nations, which bore the brunt of the 2003 Sars outbreak, are scrambling to screen all travellers.

The Civil Aviation Authority of Singapore yesterday installed scanners at Changi Airport, and similar measures have been taken in Hong Kong and elsewhere in Asia-Pacific.

But analysts warned against an over-reaction, noting that, unlike Sars - which caught Asia by surprise and unprepared - countries are now quick to take preventive and containment action.

As for airlines, 'this could be potentially devastating for an industry already struggling from falling traffic demand, but these are early days yet', said Shukor Yusof of Standard & Poor's Asian Equity Research.

Still, the spectre of another Sars-like crisis - which emptied airport terminals and aircraft cabins between June and December 2003 - could not have come at a worse time for airlines.

Deteriorating operating conditions have led the International Air Transport Association (Iata) to raise its loss forecast for the industry worldwide to US$4.7 billion this year - a sharp rise from a US$2.5 billion loss forecast just last December.

Traffic declines are sharpest in Asia, where bookings fell 27.3 per cent in February, after diving 23 per cent in January. March figures have not been released yet.

Iata's Asia-Pacific spokesman Albert Tjoeng says it's too early to push the panic button.

'It is premature to say what effect swine flu will have on the aviation industry,' he said. 'Iata is coordinating with the World Health Organization as well as with the International Civil Aviation Organization. Iata has made available best-practice guidelines to help airlines deal with public health emergencies.

'Along with a general template for dealing with public health emergencies, Iata's guidance material covers maintenance, passenger agents, cabin crew, cleaning crew and cargo. Passengers should be reassured that there is a coordinated effort between industry and government.'

But some analysts fear a prolonged flu scare could tip already-weakened global carriers into bankruptcy.

'There are some pretty shaky balance sheets out there and some could go over the edge,' said Rohan Suppiah of Kim Eng Research. 'But the impact of this could be different to that of Sars. It comes at a time when travel demand is already low. And unlike Sars, which hit mostly Asia-Pacific players, this is global.'

While the fall in travel demand - particularly in the premium traffic segment - has hit legacy carriers like Singapore Airlines, Cathay Pacific and others, a swine flu scare could hurt even low-cost carriers (LCCs), which have so far benefited from a 'downgrading' trend among travellers.

'This could be bad for LCCs,' said Mr Shukor. 'And it could be particularly bad for Singapore, which is a key aviation hub.'

SIA yesterday said it had standard operating procedures in place based on the experience gained from handling the Sars outbreak, including briefing staff to be alert for passengers who appear unwell.

'A task force, comprising members from various operational departments such as Flight Operations, Cabin Crew, Ground Services, Inflight Services, Safety, Security and Environment, etc, is also monitoring the situation,' SIA said in a statement. 'We are in touch with the relevant authorities, and will take all necessary measures in the event that they are required. As the situation for now is primarily precautionary, there are no plans to disinfect our aircraft or for our cabin crew to wear masks. However, we do carry emergency packs comprising face masks, disposable gloves and protective gowns, etc, onboard every flight, and these will be used should the need arise.'

Asian airlines lost between 70 and 80 per cent of their passengers during the height of the 2003 Sars pandemic and SIA posted its first ever quarterly loss of $312 million for the April-June 2003 quarter.