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SARS Puts Beleaguered Travel Industry in More Trouble
Aired April 23, 2003 - 15:32 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: A new travel advisory from the World Health Organization from the spread of SARS. The advisory recommends that you avoid nonessential travel to Beijing and China's Shanxi province. China has more than half of the world's 4,000 cases. Earlier advisories were issued for Hong Kong and the Gong Dong province. Toronto, Ontario is included in the latest advisory. That's because SARS spread beyond the initial risk, groups like health workers, et cetera, and because of the number of people who traveled to and from Asia.
Just when you think it couldn't get any worse for the airline and travel industry, SARS is taking its toll. Both are already hurting from 9/11 fears, the war in Iraq and the faltering U.S. economy.
Financial News correspondent Fred Katayama now on that bumpy ride ahead -- Fred.
FRED KATAYAMA, CNNfn CORRESPONDENT: And it does look bumpy indeed, Kyra.
SARS is slamming the services sector, especially the travel and leisure industries. And one economist says it could help send the world into a recession.
The hardest hit segment: the airlines. Traffic fell 10.5 percent in the third week of April from the year before. Some people simply don't show up for their flights, so the airlines have slashed their flight schedules. J.P. Morgan now expects operating losses at the big U.S. carriers to wind to more than $12 billion this year.
Now earlier today the parent of struggling American Airlines, AMR, partly blamed the epidemic for its $1 billion quarterly loss.
Theme parks say they haven't felt the impact yet. But Disney told securities regulators that SARS could disrupt its theme park business, especially Walt Disneyworld in Orlando.
With few exceptions, most manufacturers and retailers say they haven't felt the impact yet, but should the epidemic force the closure of plants or ports overseas, businesses and consumers could feel the impact since the United States buys so many goods from Asia. Chip makers Novellus and Microchip Technology have warned that SARS could hurt their earnings. Ninety percent of toys, half of electronics products and nearly half of all shoes come from factories in Asia.
And SARS is even impacting some prospective parents. China is the world's leading exporter of babies. One adoption agency in Maryland told us that three families that were supposed to pick up their babies next month have postponed their travel to China. That's because all adoptions have to be processed at the consulate in Guang Xo (ph), which happens to be ground zero for the epidemic -- Kyra.
PHILLIPS: Fred, you've mentioned it a little bit. But talk to us more about the long-term impact that SARS could have on the economy.
KATAYAMA: Well, Kyra, one economist says that SARS could help sink the world economy into a recession. Now SARS, when you combine that with economic uncertainty and the Iraq war -- it says that could be the last nail in the coffin for the economy. Morgan Stanley's chief economist, Stephen Roach, says that if that happens, demand for U.S. goods will shrink and that will hurt U.S. exporters -- Kyra.
PHILLIPS: What about companies overseas? What types of steps are they taking to prevent any type of disaster as this threat still lingers?
KATAYAMA: Yes, they're taking countermeasures. U.S. manufacturers and investment banks with operations in those affected areas are temporarily banning travel to those regions and they're using video conferencing instead as well as e-mail. Executives coming back from trips there are asked to stay home for 10 days and some companies are encouraging local executives to work from home, in effect telecommuting.
Back to you, Kyra.
PHILLIPS: Fred Katayama, thank you.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Aired April 23, 2003 - 15:32 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: A new travel advisory from the World Health Organization from the spread of SARS. The advisory recommends that you avoid nonessential travel to Beijing and China's Shanxi province. China has more than half of the world's 4,000 cases. Earlier advisories were issued for Hong Kong and the Gong Dong province. Toronto, Ontario is included in the latest advisory. That's because SARS spread beyond the initial risk, groups like health workers, et cetera, and because of the number of people who traveled to and from Asia.
Just when you think it couldn't get any worse for the airline and travel industry, SARS is taking its toll. Both are already hurting from 9/11 fears, the war in Iraq and the faltering U.S. economy.
Financial News correspondent Fred Katayama now on that bumpy ride ahead -- Fred.
FRED KATAYAMA, CNNfn CORRESPONDENT: And it does look bumpy indeed, Kyra.
SARS is slamming the services sector, especially the travel and leisure industries. And one economist says it could help send the world into a recession.
The hardest hit segment: the airlines. Traffic fell 10.5 percent in the third week of April from the year before. Some people simply don't show up for their flights, so the airlines have slashed their flight schedules. J.P. Morgan now expects operating losses at the big U.S. carriers to wind to more than $12 billion this year.
Now earlier today the parent of struggling American Airlines, AMR, partly blamed the epidemic for its $1 billion quarterly loss.
Theme parks say they haven't felt the impact yet. But Disney told securities regulators that SARS could disrupt its theme park business, especially Walt Disneyworld in Orlando.
With few exceptions, most manufacturers and retailers say they haven't felt the impact yet, but should the epidemic force the closure of plants or ports overseas, businesses and consumers could feel the impact since the United States buys so many goods from Asia. Chip makers Novellus and Microchip Technology have warned that SARS could hurt their earnings. Ninety percent of toys, half of electronics products and nearly half of all shoes come from factories in Asia.
And SARS is even impacting some prospective parents. China is the world's leading exporter of babies. One adoption agency in Maryland told us that three families that were supposed to pick up their babies next month have postponed their travel to China. That's because all adoptions have to be processed at the consulate in Guang Xo (ph), which happens to be ground zero for the epidemic -- Kyra.
PHILLIPS: Fred, you've mentioned it a little bit. But talk to us more about the long-term impact that SARS could have on the economy.
KATAYAMA: Well, Kyra, one economist says that SARS could help sink the world economy into a recession. Now SARS, when you combine that with economic uncertainty and the Iraq war -- it says that could be the last nail in the coffin for the economy. Morgan Stanley's chief economist, Stephen Roach, says that if that happens, demand for U.S. goods will shrink and that will hurt U.S. exporters -- Kyra.
PHILLIPS: What about companies overseas? What types of steps are they taking to prevent any type of disaster as this threat still lingers?
KATAYAMA: Yes, they're taking countermeasures. U.S. manufacturers and investment banks with operations in those affected areas are temporarily banning travel to those regions and they're using video conferencing instead as well as e-mail. Executives coming back from trips there are asked to stay home for 10 days and some companies are encouraging local executives to work from home, in effect telecommuting.
Back to you, Kyra.
PHILLIPS: Fred Katayama, thank you.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
