Aircraft operated by Cathay Pacific Airways Ltd. stand on the tarmac at Hong Kong International Airport in Hong Kong, China, on Friday, Aug. 7, 2020.
Paul Yeung | Bloomberg | Getty Images
Singapore Airlines and Hong Kong’s Cathay Pacific Airways will “inevitably” take a longer time to recover from the coronavirus crisis, an aviation consultant told CNBC.
That’s because these carriers are based in markets with no domestic demand for flights, in a time where international travel is still very limited, said Joanna Lu, Asia’s head of consultancy at Cirium.
Airlines have suffered massive losses since air travel was virtually halted when most countries shut their borders earlier this year, in a bid to stem the spread of the coronavirus pandemic.
Both carriers saw profits turn to loss in their latest earnings report card.
Cathay Pacific reported a loss of 9.87 billion Hong Kong dollars ($1.27 billion) for the first half of 2020, after registering a profit of 1.35 billion Hong Kong dollars a year ago. For the quarter ended June 30, Singapore Airlines reported a net loss of 1.12 billion Singapore dollars ($817.5 million), down from a net profit of 111 million Singapore dollars the previous year.
Some countries have since reopened to tourists, with Covid-19 testing and health screenings in place at airports, but many are still closed to international visitors as confirmed cases top 20.5 million globally.
Lu told CNBC’s “Capital Connection” on Wednesday that travel within a domestic or regional market is likely to resume more quickly, compared to long-haul flights to international destinations.
“Those airlines that are serving a great scale of domestic market would probably gain more benefit from it, including carriers in China, Japan and maybe Indonesia,” she said.
However, the opposite is true for Hong Kong and Singapore, where locals do not travel domestically by air due to the small land area.
Lu also weighed in on reasons why the International Air Transport Association in June said Asia Pacific is expected to post “the largest absolute losses” in 2020.
She said the disruption to international travel has been the “major cause” of “negative progress” in the industry in Asia Pacific. Additionally, she said the region has many countries and markets, while Europe and the U.S. have “pretty much been operating as a single, united domestic market.”
Healthcare workers move a patient in the Covid-19 Unit at United Memorial Medical Center in Houston, Texas Thursday, July 2, 2020.
Mark Felix | Getty Images
The spread of the coronavirus could be elevated this fall with as many as 150,000 daily cases in the U.S., according to Morgan Stanley’s biotechnology analyst Matthew Harrison.
“We update our scenarios to account for the higher sustained infection rate,” Harrison said in a note Thursday. “Our bull [most optimistic] case reflects similar virus control to Europe while our base [most likely] case assumes a near-term plateau followed by increased spread in the fall. [About] 150,000 daily new cases are possible without better control of the virus.”
Harrison previously projected a “second wave” in the autumn with daily new cases totaling between 40,000 and 50,000 nationwide. However, the recent emergence of hot spots — Arizona, Texas, Florida and California — has reflected a high rate of infection, which led the analyst to adjust to a more pessimistic view on the pandemic.
The analyst has gained a wide following on Wall Street for his success in predicting the course of the pandemic and government responses. For example, in April, Harrison warned the reopening of the U.S. economy would be a slow and tedious process.
“Our assumption of a growing reproduction number, and consequently increasing daily cases, throughout the rest of the year is based on the fact that traditionally the spread of viruses is elevated in the fall compared to the summer primarily due to more people in enclosed spaces,” Harrison said.
A recent resurgence in new cases has forced a number of states to roll back their reopening progress, which weighed on the stock market that rallied massively in the second quarter on hopes for a fast economist recovery.
Texas and Florida hit grim records earlier this week for daily coronavirus deaths based on a seven-day moving average.The virus has infected an average of 66,805 people per day in the U.S. over the past seven days, up more than 7% compared with a week ago, according to a CNBC analysis of data compiled by Johns Hopkins University.
On Wednesday, California reported a record spike in daily infections and passed New York as the U.S. state with the most confirmed infections since the pandemic began.
To be sure, Harrison said his projection doesn’t take into account any pharmacological intervention such as vaccines or strict lockdown measures that could potentially dampen the infection rate.
There has been a slew of positive news on the vaccine front this week. The U.S. agreed to pay drugmaker Pfizer and German partner BioNTech nearly $2 billion for 100 million coronavirus vaccines if their candidate proves both safe and effective.
Meanwhile, another vaccine candidate from Oxford University and AstraZeneca showed a positive immune response in an early trial. Earlier this week, British pharmaceutical company Synairgen claimed that its new respiratory coronavirus treatment has reduced the number of hospitalized Covid-19 patients needing intensive care in a clinical trial.
Goldman Sachs biotech analyst Salveen Richter said the Covid-19 vaccine market will be similar to the flu vaccine market, which requires an annual or periodic vaccination. The analyst also cited data showing the global vaccine market will grow to at least $40 billion in 2023 from $35 billion in 2018.
— CNBC’s Michael Bloom contributed reporting.
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