New virus could trigger travel sector woes, say industry analysts

Photo: The Canadian Press

Passengers wear protective face masks at Hong Kong train station.

A deadly new virus that emerged in China is raising concerns beyond the public health sphere as experts warn about the potential economic cost of a global outbreak that is already drawing comparisons to the deadly SARS epidemic 17 years ago.

Transportation and tourism companies have seen declines in share prices amid travel warnings and restrictions from governments around the world hoping to avoid a repeat of the spread of Severe Acute Respiratory Syndrome, which cost the Canadian economy an estimated US$4 billion.

At least 17 people have died and more than 500 have been infected by the ailment called novel coronavirus, whose early cases are linked to a market in Wuhan in central China. The World Health Organization postponed until Thursday a decision on whether to declare an international emergency over the outbreak of the flu-like illness, which can cause pneumonia and other severe respiratory symptoms, including one case in the United States.

"The cost to the global economy can be quite staggering, in negative GDP terms, if this outbreak reaches epidemic proportions as until this week, the market was underestimating the potential of the flu spreading," Stephen Innes, chief Asian strategist for AxiCorp, said in a report.

The travel sector has already started to feel the hit as shares of four North American airlines that fly to China, including Air Canada, fell on Tuesday amid growing anxiety about the viral infection.

None of the airlines fly directly to Wuhan, but their Chinese partner airlines do, and some passengers transfer from a Chinese carrier to a Canadian one, offering the potential for the virus to spread here.

Shares at the three biggest U.S. cruise lines have also fallen, with Royal Caribbean Cruises Ltd. — which boasts a major Chinese presence — dropping more than four per cent this week.

Analyst Chris Murray of AltaCorp Capital pointed to the past for clues on the market volatility, propelled by "an unknown level of potential disruption."

"History suggests shares may be in for a rough ride," he said of airline and tourism stocks in a research note. He recalled jittery stock movements after the SARS outbreak in 2002 and 2003, as well as with H1N1 influenza in 2009 and the Ebola virus in 2014.

"These larger-scale epidemics can have a more pronounced near-term impact. However, once a better understanding of the magnitude of the spread and severity was understood, stock prices recovered quite sharply in all three cases within months," he said.