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Hong Kong Airline Faces SARS Challenge - 2003-04-13

Hong Kong's aviation industry is suffering as travelers are frightened away from the city because of Severe Acute Respiratory Syndrome, or SARS. The city's dominant airline is considering tough measures to cut its losses, but does not plan to ground its fleet of passenger jets.

Executives at Cathay Pacific Airways said Sunday they can not rule out any measures to stop the airline's losses, but that for now it will keep its passenger planes flying.

An internal message leaked to the news media on Saturday revealed that Hong Kong's main airline was considering grounding all flights if passenger numbers continue to fall.

Business travelers and tourists alike have canceled visits to Hong Kong, as an outbreak of SARS continues to spread. The disease, which causes a serious pneumonia, has sickened at least 1,150 people in Hong Kong and killed 40. The World Health Organization reports 3,000 cases and at least 119 deaths worldwide.

The scare has cut Cathay's passenger numbers to about 10,000 a day, compared with 30,000 normally. The airline has canceled about 40 percent of its flights. Other airlines also have cut flights to and from Hong Kong.

Cathay Pacific's drop in passengers has been more dramatic than the drop U.S. airlines saw after the terror attacks in 2001, according to Philip Wickham, an aviation industry analyst with ING, an investment bank in Hong Kong.

"Cathay is talking 70 and 80 percent drops. That is unprecedented, I've never seen such figures," he said. "So it's just a pretty prudent step for them to consider if there is not change in the environment." Mr. Wickham estimates the airline is losing $3.8 million a day.

Hong Kong's airport authority, which runs the city's international airport, says that it, too, is suffering, but not as much as Cathay. An authority spokesman says 60-70 percent of all flights are still coming in and there has been almost no change in cargo shipments.

The World Health Organization warned travelers to avoid Hong Kong and southern China because of SARS. Several countries not only are warning citizens to avoid the region, they are imposing new controls on visitors from Hong Kong and China.

However, the Malaysian government on Sunday reversed a ban on most visitors from Hong Kong and mainland China. It imposed the ban a few days ago to try to block the spread of SARS. The government suspended the ban after Hong Kong promised to check all outgoing passengers for symptoms of illness.