China’s international flight suspensions leave travellers stranded, hurt businesses
When Dwight Law’s father died in November, the Shanghai-based U.S. expat flew back to Kansas, leaving his wife and dog behind in China while he attended to matters relating to his father’s death.
Law, who runs an architecture and design firm, has lived in Shanghai for 20 years and had expected to return last week.
But with dozens of flights between China and the United States suspended by Chinese authorities because of passengers testing positive for COVID-19 on arrival, finding a flight back even in February is proving near-impossible and posing a threat to Law’s company.
“Now with no flights scheduled, I am currently locked out of China, away from my wife and family and not able to attend to business,” Law said. “I have 50 employees in China. Without my presence, the business will suffer and so will the livelihoods of each employee.”
Even before the latest flight cancellations, international capacity to and from China was running at just 2% of pre-COVID levels as the country sticks to a strict zero-COVID policy of stamping out all cases while other parts of world open up.
The zero-COVID mentality is likely to stay for most of 2022, Bank of America Securities analysts said in a note on Tuesday, in bad news for the 845,000 foreign passport holders in China, a number already reduced since the start of the coronavirus pandemic.
China’s aviation regulator in January alone cancelled 143 return flights as the highly transmissible Omicron variant spreads across the globe, according to a report from Chinese aviation data provider flight master last Friday.
That was the most in a month since it introduced a policy of suspending flights when positive cases were found in June 2020.
The flight suspensions, which also include some services to Europe and other parts of Asia, are one of the biggest challenges faced by companies doing business in China, said a spokesperson for the Europe Chamber of Commerce in China.
“The recent cancellations send a clear message that China will not deviate from its current strategy,” the spokesperson said, referring to the zero-COVID policy.
Graphic: China’s international flight suspensions – https://graphics.reuters.com/CHINA-AVIATION/USA-FLIGHTS/lbvgnjerbpq/chart.png
China now requires passengers to have started costly COVID tests seven days before boarding in the departure city of their direct flight into China. That creates a headache for travellers like Law who are not based in U.S. cities with direct flights.
Tough travel policies in transit hubs for U.S.-China travellers like Taiwan, Korea and Japan also effectively rule out less costly indirect flights.
A Google Flights search by Reuters shows no flights from San Francisco to Shanghai are available for booking until late March at any price.
Jing Quan, minister of the Chinese embassy in the United States, said Beijing is working closely with the U.S. State Department to strike a balance on the number of commercial flights to China. Charter flights for Olympics athletes have not been affected, he said.
There has also been less of an impact on cargo. China Southern Airlines plans to fly its A380 superjumbos with cargo only from Los Angeles to Guangzhou, while carrying passengers in the other direction, it told the U.S. Department of Transportation (DOT).
Hainan Airlines has received U.S. approvals for cargo-only flights using passenger planes and China Eastern is seeking a similar nod, according to DOT filings.
While that is a comfort to exporters, it provides little solace to stranded travellers like Law.
“COVID will not go away I am afraid. It is here to stay,” he said. “What’s China going to do, close its borders for the next five or 10 years while the world outside of China learns to manage, live and gain herd immunity? It’s nuts.”
(Reporting by Stella Qiu in Beijing and Jamie Freed in Sydney; additional reporting by Martin Pollard in Shanghai; Editing by Raju Gopalakrishnan)
United Airlines cuts capacity forecast, flags cost pressure on Omicron turmoil
United Airlines Holdings on Wednesday trimmed its capacity forecast and warned of higher costs, after posting a smaller-than-expected fourth-quarter loss, citing turbulence from the Omicron coronavirus variant.
The Chicago-based carrier said the latest wave of the health crisis has depressed near-term demand even as bookings for the spring and beyond remain strong.
United said its priority is to match capacity with demand. As a result, its 2022 capacity is now projected to be lower than in 2019, instead of growing 5% as estimated earlier.
It expects to restore 82% to 84% of pre-pandemic capacity in the quarter through March, with revenue recovering to just 75% to 80% of 2019 levels.
Costs this year are now expected to be higher than in 2019, instead of going down.
United’s shares declined about 2.5% to $43.31 in extended trading.
Rival Delta Air Lines last week forecast a current-quarter loss due to the Omicron variant’s impact on travel.
Winter storms and an increase in COVID-19 infections among employees have led to mass flight cancellations. In one day alone, nearly one-third of United’s workforce at Newark Liberty International Airport called in sick. Last week, the carrier said 3,000 employees were infected with the virus.
In response, carriers have cut their flight schedules and are offering crew members not scheduled to work incentives to pick up additional shifts and trips.
To ease staffing issues, United is offering its pilots premium pay through the end of the month.
The incentives and flight cancellations are further inflating industry costs, which have gone up in the past year with efforts to ramp up operations.
United estimated current-quarter costs to be 14% to 15% higher than in the same period in 2019.
Analysts at Jefferies said cost pressures are expected to be a “significant headwind” for the carrier.
United said its Boeing 777-200 planes equipped with Pratt & Whitney (PW) engines would begin to return to service in the current quarter.
It had to ground the wide-body jets after a United flight to Honolulu suffered an engine failure and made an emergency landing last year in Denver.
On an adjusted basis, the carrier reported a loss of $1.60 per share for the quarter through December, compared with a loss of $7.00 per share a year ago. Analysts surveyed by Refinitiv, on average, had expected a quarterly loss of $2.11 per share.
Fourth-quarter revenue came in at $8.19 billion, compared with $3.4 billion a year ago, beating the consensus estimate of $7.97 billion.
United will discuss the results on a call with analysts and investors on Thursday morning.
(Reporting by Rajesh Kumar Singh; Editing by Richard Chang)
World Bank chief takes swipe at Microsoft’s $69 billion gaming deal as poor countries struggle
World Bank President David Malpass on Wednesday criticized Microsoft’s $69 billion takeover of gaming developer Activision Blizzard as a questionable allocation of capital at a time when poor countries are struggling to restructure debts and fight COVID-19 and poverty.
Malpass said during a Peterson Institute for International Economics virtual event that more capital needed to flow into poor countries, but these flows have been disrupted by unusually easy monetary policies in developed countries.
He said he was struck by the scale of Microsoft’s acquisition deal for “Call of Duty” maker Activision Blizzard. This dwarfed the $23.5 billion in cash contributions agreed in December by wealthier donor countries to the International Development Association, the World Bank’s fund for the poorest countries — about $8 billion annually over three years, he said.
“You have to wonder: ‘Wait a minute, is this the best allocation of capital?'” Malpass said of the Microsoft deal. “This goes to the bond market. You know, a huge amount of (capital) flows are going to the bond market.”
A very small portion of the developing world has access to such bond financing, while too much capital remains bottled up in advanced countries, especially in central bank reserve assets used to back long-term bond purchases, he added.
A spokesperson for Microsoft did not immediately respond to a Reuters request for comment on Malpass’ remarks.
His comments echoed a similar call last week for central banks to cut long term bond holdings to free up lending capital.
“That gets you into a situation where a huge amount of the capital is being allocated to already capital-intensive parts of the world — the advanced economies — building more and more on top of already heavily built infrastructure and real estate, for example,” Malpass said.
Meanwhile, a return to more normal global investment returns is needed to bring more financing capacity to small businesses in the developing world,” he said.
“In order to address the refugee flow, that malnutrition that’s going on, and so on, there has to be more money and growth flowing into the developing countries,” Malpass added.
(Reporting by David Lawder; Editing by David Gregorio and Sandra Maler)
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