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The two major global aircraft manufacturers, Boeing and Airbus are already reeling under safety issues and corruption charges respectively. Coronavirus has only made it even more turbulent.

China is a key supplier of multiple aircraft components used across the Airbus family of aircraft. Airbus’ completion center for its A320 and A330 models in Tianjin was closed for a short period. Further disruption to these plants can affect the manufacturing rate and can potentially prolong its backlog that is at 7,725, of which more than 6,500 aircraft are of the A320 and A330 models (as of Jan 31, 2020). Boeing will face a significantly lesser impact as its factory in Shanghai primarily deals with installing interiors to the now grounded 737 MAX aircraft. It also has a part of manufacturing in Tianjin. Aside from these two, French aviation giant, Safran has closed all of its manufacturing facilities across more than 20 Chinese cities.

A cloud of uncertainty hangs over Chinese Airlines; they have not only canceled flights but have also put their foreign pilots on leave. The Hong Kong carriers – Hong Kong Airlines and Cathay Pacific are likely to be the worst-hit going forward. Hong Kong Airlines, in particular, was operating under fiscal stress over the last few quarters, and the situation for both airlines became more complicated after the pro-democratic strikes in Hong Kong. Drastic steps such as temporary workforce and route reduction had to be taken to keep financial distress at bay. Vietnamese airlines have cumulatively lost about $430 million, as per government statements, and would potentially affect 400,000 passengers per month after a travel ban on all flights between Vietnam and China. Numerous airlines across the globe have canceled all or some of their routes to China, a few key carriers being British Airways, United Airlines, American Airlines, and Delta Airlines. These cancellations have led to a drastic drop in overall scheduled capacity to and from China and that is reducing with each passing day according to various aviation analytics organizations.

European airlines like Finnair and Ryanair have declared that the impact of the virus on their operations would be minimal, and can even potentially improve short routes demand within Europe. Local travelers can potentially shift their plans from Asia to Europe, as was the case during the last such epidemic (SARS and Bird flu).

Key events such as Singapore Air Show will witness reduced participation this year, as key attendees have already pulled out. Japan, in particular, will be in a dire situation as the Tokyo Summer Olympics is set to start in July this year. If the epidemic is not contained in the short term, the attendance to such events, which are a huge boost to the local and global travel and tourism sector, will face a severe downturn.

The highest priority will be to minimize the spread to newer regions. Canceled routes and shut down factories will need to be restarted as soon as possible to ensure minimum damage to global supply chains and the overall travel industry.

For more information on this topic or to schedule an interview/interaction with our spokesperson, please email Srihari Daivanayagam at srihari.daivanayagam@frost.com.

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