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Coronavirus has spurred 'unprecedented' wave of US flight cancellations

Coronavirus is striking a blow to U.S. airlines’ bottom lines, as carriers have no choice but to wait out an indeterminable number of cancelled flights and decreased demand to and from China and Hong Kong.

Data from the U.S. Department of Transportation suggests that cancelled flights between U.S. cities and China and Hong Kong are costing the airlines between $313,000 to $1.1 million for each day those flights are cancelled, depending on the carrier.

“The scale of changes and cancellations is unprecedented,” said John Grant, senior analyst with flight data firm OAG. “There has never been such a swift response in terms of cancellation of flights as we've been seeing with this particular event... It’s quite a dramatic change of strategy than was previously applied when SARS was here.”

United Airlines Holdings Inc. (UAL), Delta Air Lines Inc. (DAL) and American Airlines Group Inc. (AAL) comprise the group of U.S. carriers with routes between the U.S., China, and Hong Kong. All have issued temporary reductions and cancellations to service in response to health precautions, decreased demand and government advisories against travel to the region. Collectively, the “Big Three” domestic carriers generated more than $186 million during the third quarter of 2019 from travel between U.S. locations and China/Hong Kong.

Grant said U.S. airlines remain in a resilient position, compared to their Chinese counterparts, most significantly, China Eastern Airlines Corp. Ltd., (CEA), which has reduced its international capacity by more than 31%. Among U.S. passenger carriers, United runs the majority of U.S.-China routes, with service to the region representing about 5.2% of its monthly international revenue, according to OAG. The Wall Street Journal reports that China routes made up 7% of United’s total passenger traffic, last year. The most recent data published by the U.S. Department of Transportation concerning U.S. carriers comes from third quarter 2019, which Grant said can serve as a proxy to estimate the airline’s future coronavirus-related losses.

During the third quarter, United’s revenue from U.S.-China and Hong Kong passenger routes, approximately 24 flights per day, totalled roughly $99 million or approximately $1.1 million per day. United began decreasing its service to mainland China the first week in February and halted all of its previously scheduled flights starting Feb. 6. The company said flights between the U.S. and Hong Kong will cease Feb. 7, with plans to resume service on Feb. 20. In a statement, United said flights to mainland China are currently planned to resume on March 28 while it continues to assess and adjust to the fluid situation.