Coronavirus outbreak costs hit Qantas, Chanel, other global brands hard


Chanel – the epitome of high fashion – was due to hold a special catwalk display of its outfits in Beijing in May. The virus means the show has been delayed.

Jaguar Land Rover boss Sir Ralf Speth confirmed this week his company, Britain’s biggest car manufacturer, could face a shortage of Chinese-made parts within weeks.

He revealed the firm has put parts into suitcases and flown them from Beijing to the UK in a bid to ensure it can keep operating.

HSBC, which operates in 64 countries including most across Asia, is reporting staff disruption at its branches across much of China. It is already making provision for bad loans as businesses in China and Hong Kong struggle.

Closer to home, Qantas this week said it would cut flights into Asia by 15 per cent until the end of May. Flights to New Zealand will be cut by 6 per cent and those within Australia by 2 per cent amid warnings the airline’s profits could take a $150 million flight. International Airport sales have fallen by an average of 27 per cent in Sydney, Melbourne and Brisbane since the outbreak began.

The owner of Sydney’s Strand Arcade and Melbourne’s Chadstone shopping centres, Vicinity, had to downgrade its earnings this week 2.2 per cent because nervous shoppers weren’t showing up.

The absence of more than 120,000 Chinese tourists a month – who by next Saturday will have been locked out of the country for more than four weeks – has compounded the impact of a torrid bushfire season.

Four distinct businesses, from high retail to mass travel, all responding to a crisis that has economists and governments struggling to measure its ultimate impact.

The University of Sydney’s Salvatore Babones puts the total figure at up to $12 billion for Australia alone, with passenger transport, business travel, tourism and education services hardest hit.

“Few countries depend on the China market to such an extent as Australia,” he said in research published by the Centre for Independent Studies this week.

“Australia’s $175 billion total exports to China constituted 37.5 per cent of all exports and 9.3 per cent of Australia’s GDP.”

University of Technology nursing student Bella Wang is the face of what is becoming a $1.2 billion crisis for the university sector. 100,000 students of Australia’s highest paying students have now been locked out of the country for almost a month.

When Prime Minister Scott Morrison announced an extension of the travel on Thursday for another week, Ms Wang responded immediately: “No. OMG”.

“I am so disappointed,” she said from China over social media service WeChat.

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“To tell you the truth, if it weren’t for all my things being in Sydney, I might choose to study in another country,” she said.

“It’s unfair for the foreign students. We will delay a lot of time. If we don’t catch up with the classes in this semester, we will delay for one year. Other countries do not ban foreign students.”

Babones said with each extension of the travel ban, the risk of students switching to other countries was now real. Canada and the UK – Australia’s rivals in the international student market – have not imposed travel bans on students.

“If tens of thousands of Chinese students suddenly cancel their enrolments at Australian universities and other education service providers, they can’t simply sell their places to Indian students instead, since the international student recruitment, application, approval, and visa process takes place over several months, often up to a year,” he said.

“Nor can they easily adjust prices to new market conditions. Fungible commodities like coal are sold into global markets, but bespoke services like student places are not interchangeable.”

The virus is affecting more than just large multinational firms and multi-billion dollar universities.

Corporate travel insurers now treat coronavirus as a “known-event”, which means it is excluded from their cover. That makes it more difficult for businesses to send staff into China.

Australian-based businesses that rely on packaging made in China are discovering their suppliers are struggling because they cannot source enough face masks for all their workers.

Australian Industry Group chief executive Innes Willox said his organisation’s members were often finding it difficult to get in contact with their Chinese suppliers.

The same firms are looking for alternative markets into which they can sell their products.

“The problem is that everyone else is in the same position and prices are starting to be depressed by increased supply from elsewhere. Processed and fresh food as well as wine have been hit hard,” he said.

“Other sectors impacted include conferences, tourism and of course education and those who rely on them. Plus restaurants of course.”

Australian firms are also coping with temporary worker shortages, who like students, are unable to enter the country under the government’s travel ban on all non-Australian residents travelling from China.

Migrant Workers Centre director Matt Kunkel said there were thousands of migrant workers who have visas for Australia stuck in China.

“It’s a disaster really. Migrant workers are in our hospitals, our schools, our day care centres. We can’t do it without them. Corovnarirus doesn’t know what visa you hold.”

Kunkel, whose organisation advocates for workers, argues temporary migrants and students should be allowed to come to Australia and pass the same type of health screening tests as Australian residents – effectively leaving Chinese tourists as the only people banned from entering the country.

“One person who has been in the country for almost eight years and has gone home to China to visit their family for Lunar New Year. They have a mortgage and a job and they haven’t been able to turn up.”

Kunkel said there was no real protection under industrial laws for events like coronavirus.

“Some are being forced to take annual leave. Now that we are pushing into the fourth week there aren’t enough people who are going to have enough leave to cover this,” he said.

In China, the impacts on the economy are clear and mounting.

People have stopped travelling. Across trains, buses, planes and ordinary vehicles, the daily number of trips has plummeted by 80 per cent over the past month.

That’s showing up in demand for key commodities, particularly oil, which has seen a sharp drop in prices. China accounts for almost 20 per cent of global oil consumption.

Another commodity at risk is coal. Power plants have slashed their output of energy as so many manufacturing plants have either remained shut since the Lunar New Year or are barely operational.

That has meant the demand for coal has gone into freefall.

Globally, Oxford Economics this week put the potential cost of a coronavirus outbreak pandemic at between $US400 billion and $US1.1 trillion this calendar year.

The tourism, travel and discretionary consumption sectors of all economies suffer the biggest hits, particularly those in Asia.

In its worst-case scenario, a global pandemic drives the United States and continental Europe into a technical recession through the first half of this year.

Locally, the Reserve Bank and federal Treasury are still grappling with the economic fallout for Australia, and what it means for the predicted budget surplus.

The government’s decision to stop non-Australians flying in from China only started on February 1 and has now been extended to the end of the month.

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Hard data has yet to be compiled and some of it, such as the March quarter national accounts, won’t be released until June.

If Chanel and Qantas are still issuing warnings about the fallout from the coronavirus then, the global economy will be in serious trouble.

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