Coronavirus latest: Cathay asks staff to take unpaid leave
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Airbus forced to extend closure of Tianjin A320 assembly plant
Airbus said an A320 assembly line in Tianjin remained closed after the end of the Chinese New Year break, in the latest blow to the aviation industry from the continuing coronavirus outbreak.
In a statement on Wednesday, the aerospace group said that restrictions on travel in China and beyond were “posing some logistical challenges”.
It said its Tianjin final assembly line – where it builds its A320 narrow-body aircraft – was “currently closed” without giving further details on when it would be reopened.
Airbus is constantly evaluating the situation and monitoring any potential knock on effects to production and deliveries and will try to mitigate via alternative plans where necessary.
The airline industry has been particularly hard hit by the viral outbreak, with carriers across the world suspending or reducing flights to both mainland China and Hong Kong. Cathay Pacific this morning asked its 27,000 employees to take three weeks of unpaid leave as it struggles to contend with a major drop off in demand.
Despite this, the chief executive of British Airways owner IAG said this morning that believes the overall impact of coronavirus on global air travel demand will be marginal.
Willie Walsh told an aviation conference in Doha that IAG has not identified the impact of the new virus on demand for its clutch of carriers, except for cancelled flights to China, according to a Reuters report.
FT Opinion: Centralisation hobbles China’s response
Yu Jie, senior research fellow on China in the Asia-Pacific programme at Chatham House, believes that the sluggish early reaction to the disease by Chinese officials should not come as a great surprise:
The hesitant early response to the outbreak sheds light on the way the Chinese bureaucracy approaches crises at a time when the party leadership is tightening control at almost all levels of society. At first, officials in Wuhan attempted to censor online discussions of the virus. This changed only after President Xi Jinping’s call for a much more robust approach was followed by a sudden increase in the state media coverage of the outbreak. There is no doubt that Mr Xi’s intervention will greatly speed up the response to the crisis, which should be welcomed.
Despite China’s experience with the Sars epidemic between 2002 and 2004, the sluggish reaction by officials in Wuhan should not have come as a surprise. The tendency among bureaucrats to play down crises is deeply entrenched. And, ironically, the party leadership’s recent push for greater bureaucratic accountability and its promise of stiffer punishment for those who take a “do little” approach have also contributed to the habit of covering up disasters.
You can read more of her comment for the FT here.
Virus weighs on Thailand’s economy
Analysts are expecting further interest rate cuts in Thailand, as the country’s economy takes a hit from the outbreak of coronavirus.
Thailand’s central bank cut interest rates by 25 basis points earlier today, citing a rising economic risk from the disease. The monetary policy committee said it expects the Thai economy to expand “at a much lower rate in 2020” than previously forecast, with the country’s powerhouse tourist sector likely to be badly hit.
Prakash Sakpal, an Asia economist at ING, said one cut is unlikely to be enough.
Given that things might get worse before they get better, we can expect a couple more quarters of substantially weak growth …. We don’t think one rate cut will be enough in preventing the growth slowdown, let alone boosting growth. Two rate cuts from the central bank in 2019 didn’t help much either and growth continued to decelerate through the fourth quarter of the year.
Virus threatens Apple’s iPhone production
Labour shortages in China are threatening to hamper Apple’s iPhone production, our colleagues at the Nikkei Asian Review have reported.
Travel restrictions owing to the spread of the coronavirus are expected to keep tens of thousands of workers stranded in their hometowns after the extended lunar new year holiday ends on February 10.
The shortage of labour could affect Apple’s plans to raise iPhone production this year, sources said. Hyundai, the South Korean conglomerate, said this week that it has had to shut down all of its car factories in South Korea after running out of components from China.
Chinese smartphone maker Xiaomi and local electronic component maker BOE Technology rely on factories in Wuhan. Production losses are also expected from Taiwan’s Hon Hai, which makes most of the world’s iPhones. Shares in the company, also known as Foxconn, have fallen in the past two weeks.
If the virus spread gains momentum, plans to resume production on February 10 may have to be revisited.
James Kynge and Mercedes Ruehl take a look at the threat to Apple in their latest Tech Scroll Asia newsletter. Check it out here.
Asian currencies suffer as virus weighs on monetary policy
Hudson Lockett in Hong Kong writes:
Currencies in the Asia-Pacific region lost more ground to the dollar as Thailand’s central bank surprised investors by cutting interest rates.
The Thai baht was recently down as much as 0.9 per cent. While it recovered to be almost flat in early European trading the currency was 3.4 per cent lower for the year to date. Thailand’s central bank on Wednesday cut interest rates to a record low as the country’s economy faced a hit from the virus, which has dragged significantly on tourist visits from China.
Singapore’s dollar fell 0.7 per cent and was the worst performer in the region after the country’s central bank said there was “sufficient room” within the currency’s trading band to accommodate easing of the exchange rate.
Stocks march higher for another day
Global shares were trading higher on Wednesday, extending a sharp rally this week as investors welcome market support from Beijing and bank on the economic impact of the coronavirus being less damaging than first feared.
In Europe, the Stoxx 600 index – a broad measure of the region’s biggest companies – was 0.6 per cent higher in morning trading. It has now clawed back nearly of all January’s losses.
In mainland China the CSI 300 index climbed 1.1 per cent, leaving it around 8 per cent below its levels before the virus burst into global attention in mid-January.
The moves back into risk assets this week have been based on a “significant” liquidity injection from the Chinese central bank, rather than new facts on the ground about the virus, Rabobank strategists said in a note.
Hong Kong to quarantine travellers from mainland China for two weeks
Nicolle Liu reports from Hong Kong:
Hong Kong’s chief executive Carrie Lam said on Wednesday that the government will introduce a new regulation requiring anyone who has travelled from mainland China to Hong Kong to undergo compulsory quarantine for 14 days.
Announcing the new measures – which will take effect from midnight on February 8 – Ms Lam said none of three new confirmed cases on Tuesday had a travel record during the incubation period, suggesting “the epidemic has gone to another stage”.
She also announced the shutting down of the Ocean and Kai Tak Cruise Terminals. A ship with thousands on board is being held at Kai Tak, while another is being held off the port of Yokohama in Japan, after passengers were found to have been infected with the virus.
There have now been 21 cases confirmed in Hong Kong and the territory reported its first fatality on Tuesday. The youngest patient is a 25-year-old male who had not travelled during the incubation period.
Hong Kong data shows 203 cases outside mainland China
Naomi Rovnick reports:
The Hong Kong government is publishing daily updates that show the number of coronavirus cases across mainland Chinese provinces and internationally.
The data show that while there are now 24,324 cases of the virus in mainland China, the global spread has been limited so far, with 203 confirmed cases.
Hubei province, where the outbreak started and where several cities are in lockdown, has just under 69 per cent of all Chinese confirmed cases, according to the Hong Kong data.
Singapore has the most confirmed cases of all countries outside China, at 24 thus far, despite being further from mainland China than Hong Kong, which had reported 18 as at 9am local time.
Cathay Pacific asks staff to take unpaid leave as demand plummets
Hong Kong’s flag carrier, Cathay Pacific Airways, has asked all of its staff to take three weeks of unpaid leave as the spread of coronavirus has sent demand for its flights spiralling downward.
The airline on Wednesday said it was “appealing to all employees to participate” in an unpaid leave programme between March and June, a day after it announced plans to cut the vast majority of its flights to the Chinese mainland.
“In view of the novel coronavirus outbreak and also significant drop in market demand, we just announced massive capacity cuts yesterday,” a Cathay spokesperson said. “Today, we are appealing to all employees to participate in the special leave scheme.”
On Tuesday, Cathay said it was cutting 90 per cent of its flights to mainland China and 30 per cent of its overall capacity.
“Preserving cash is the key to protecting our business,” the spokesperson said.
The leave programme will be voluntary and run between March 1 and June 30.
Malaysian confirmed cases rise to 12
Stefania Palma reports from Singapore:
Malaysia has reported two new confirmed cases of coronavirus, taking the country’s total to 12. The individuals are both Malaysian nationals who were evacuated from Wuhan.
Malaysia on Tuesday repatriated 107 individuals from the Chinese city. They, together with 26 government officers who facilitated the evacuation, will all be quarantined for 14 days.
Cruise ship off Japan hit by coronavirus outbreak
Naomi Rovnick reports:
Ten passengers on the Diamond Princess, a cruise ship moored off of Yokohama in Japan, have tested positive for coronavirus.
There are more than 3,700 passengers and crew on the vessel and all have been asked to self-quarantine in their cabins for a fortnight.
The infected passengers will be taken ashore by the Japanese coastguard and brought to local hospitals, Princess Cruises said in a statement.
Tech supply chain risks set to rise
Chinese and Taiwanese suppliers to Apple are braced for severe labour shortages as travel restrictions keep workers in the home towns they returned to for the lunar new year holiday, our sister title, the Nikkei Asian Review, reported earlier.
“This is new to everyone…we have to deal with it with pain,” an iPhone supply chain executive told Nikkei.
The new year holiday is a peak travel period in China, with millions of workers leaving cities and manufacturing centres to see their families.
Meanwhile, some large Chinese commercial and industrial hubs, including the cities of Hangzhou and Wenzhou, have imposed curbs on people leaving their homes in attempts to control the spread of coronavirus.
Read more on the potential hit to the iPhone supply chain from the Nikkei Asian Review here.
US airlines suspend Hong Kong flights
Naomi Rovnick reports:
United Airlines said it will suspend services to the Asian financial centre, days after it also cut its mainland China flights. This came just after American Airlines announced a similar step.
Both American and United have halted their services to Hong Kong until February 20.
British carriers that have stopped flying to China, such as British Airways and Virgin, are still selling flights to Hong Kong.
The territory has reported 18 coronavirus cases and one death, which is a tiny fraction of the number of cases in mainland China. But United and American both cited a drop in demand for travel to Hong Kong for their decisions.
News from overnight: China round-up
Naomi Rovnick writes:
China’s 31 provinces reported 3,887 new cases of coronavirus on Tuesday, according to the latest round-up by the China National Health Commission. The vast proportion of these were reported by Hubei province, which includes Wuhan, the centre of the outbreak.
This takes the total number of confirmed cases in China to 24,324, with 490 deaths.
The semi-autonomous regions of Hong Kong and Macau have confirmed 18 and 10 cases respectively, with one death so far in Hong Kong.
Despite the World Health Organization having publicly praised the government of Xi Jinping’s handling of the virus, senior WHO expert John Mackenzie has broken ranks and accused China of not reporting cases quickly enough in the early stages of the outbreak, the FT’s Primrose Riordan and Sue-Lin Wong report here.
Good morning and welcome to the FT’s rolling coverage of the novel coronavirus outbreak.
As the disease continues to spread, US airlines United and American have have suspended flights to Hong Kong, in a blow to the Asian financial centre.
Chinese authorities, meanwhile, are coming under growing pressure over their handling of the virus, with one World Health Organisation expert breaking ranks to criticise the time it took for the country to initially report cases.
We will have the latest developments and reaction as we get them throughout the day, so follow along here.
The FT’s live coverage of the coronavirus outbreak will begin later on Wednesday. You can review all of Tuesday’s developments ‘as they happened’ here.