Korean aviation fears profound impact to Korean Air and Asiana Airlines if the United States bans or limits flights as coronavirus cases continue to rapidly grow in Korea, now the second-largest outbreak. Observers expect this week will be critical for Korea to bring the outbreak under control and convince global governments not to apply restrictions.
Upwards of half of Korean Air and Asiana’s business depends on North America. Korean Air earned 29% of passenger revenue last year directly on North American routes, where many passengers connect to Southeast Asia, which comprises a further 21% of revenue.
Without North American connections, much of Korean’s Asian traffic would be reduced, with some regional flights unviable that in turn impact other markets. For Asiana, North America comprises 21% of passenger revenue, with Southeast Asia a further 19%. A decrease in passenger flights would impact Korean and Asiana’s large cargo businesses, which carry strong volumes in the bellies of passenger aircraft. North America accounts for 42% of Korean’s cargo revenue and 51% at Asiana.
While mainland Chinese airlines have incurred a larger downturn, they are mostly domestic carriers with a proportionally smaller exposure to the US. They are also largely state-owned, providing financial cushioning. Korean Air and Asiana are privately owned, and have long had weak finances – especially Asiana. Other impacted airlines, from those in the US to Cathay Pacific and Ryanair, have strong cash reserves.
The US on Monday made Iran the second country to face flight entry restrictions due to the coronavirus. The measure was not expanded to Korea or Italy. Additional measures could be in place as the US closely watches the role of aviation; the White House on Wednesday is due to meet with the CEOs from American Airlines, United Airlines, Southwest Airlines and JetBlue Airways, according to Reuters.
The entry restrictions require that any passenger who had been in mainland China – and now Iran – in the last 14 days enter the US at a designated airport where US officials are “focusing public health resources,” according to the order.
Eleven US airports are currently designated. If similar restrictions are applied to anyone who has been in Korea, Korean Air would likely have to stop flights to airports not on the designated list, including Boston, Las Vegas, and Guam.
But observers fear a worse scenario for Korean aviation if there is an effective or outright ban, although this would be unprecedented with not even Chinese airlines banned from flying to the US.
Flights between Korea and the US are already reduced. Delta Air Lines is suspending Seoul-Minneapolis/St. Paul flights while reducing flights between Seoul and Atlanta, Detroit and Seattle. United Airlines is reducing Seoul-San Francisco services to three weekly flights. American Airlines has not made any changes yet while Hawaiian Airlines has suspended services. Other foreign airlines have also reduced their flying to Korea.
Korean Air and Asiana reduced global flying, sometimes significantly before Korea became a larger coronavirus outbreak. Korean Air was already in the spotlight after one of its flight attendants, who flew on US routes, was confirmed to have the coronavirus. The US has increased its travel warning for Korea.
Any ban or restriction on flights to Korea may not reflect actual risk, and could potentially set a precedent for other countries. Putting restrictions in place means they will later need to be lifted, which could be an arduous process that occurs well after consumer sentiment returns.
Korean Air Lines Co. aircraft sit parked at Incheon International Airport in Incheon, South Korea, … [+]
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