24 Carriers Scrap March Flights to and From Macau, Deal Gaming Rebound Hopes Another Blow

Posted on: February 29, 2020, 04:50h. 

Last updated on: March 1, 2020, 11:02h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Twenty-four Asian airlines are canceling March flights to and from Macau because of the novel coronavirus, dealing a severe blow to an already fragile local economy that only recently reopened gaming properties following a 15-day closure.

In another blow to Macau’s recovery efforts, 24 airlines are canceling March flights in and out of the peninsula. (Image: Macau Business)

The Macau International Airport confirmed that the following carriers are scrapping flights in and out of the Special Administrative Region (SAR) next month: Air Macau, Jejuair, China Eastern Airlines, China Southern Airlines, Juneyao Airlines, Air Asia, Eva Airways, Air Busan, Shanghai Airlines, Long Air, Hainan Airlines, Tiger Air Taiwan, Starlux Airlines, Jin Air, Xiamen Airlines, Philippines Airlines, Bamboo Airways, Tiger Airways, Tway Air, Vietnam Airlines, Easter Jet, Shenzhen Airlines, Cebu Pacific Air, and Spring Airlines.

News of the March flight cancellations comes as Macau is already grappling with strict travel and visa controls that are sapping gross gaming revenue (GGR) in the wake of the COVID-19 outbreak.

We assume GGR to drop about 55 percent in the first quarter,” said JPMorgan analysts in a note out earlier this week. “Profits will inevitably decline faster than the top line, given the rigid cost structure – a maximum 15 percent to 20 percent of operating expenditure is subject to cost containment.”

Gaming properties on the peninsula have been slowly reopening since Feb. 19. But it’s still far from business as usual for three reasons: because of border screenings, policies within casinos limiting the number of players at tables and slot machines, and Beijing restricting the number of Macau visitation visas issued to residents of mainland China, the primary source of the SAR’s gamblers.

Big Cities Affected

According to data published by the Macau International Airport, some arriving flights to the peninsula from Asian cities will be scuttled from March 1 through March 28. Others have cancellation windows of just a few days up to two weeks.

Potentially dragging on Macau’s recovery efforts are the Chinese cities affected by the temporary flight bans, a group that includes major metropolitan areas such as Beijing, Shanghai, and Shenzhen. Compounding the peninsula’s woes are the other Asian cities subject to the cancellations, which include Bangkok, Jakarta, Kuala Lampur, Seoul, and Taipei.

The aforementioned group includes some of the region’s biggest carriers. For example, China Southern and China Eastern are Asia’s two largest airlines, while Air Asia, Lion Air, and Vietnam Airlines are also among the top 25 in terms of annual passengers carried.

Weak Backdrop

The flight cancellations come at a perilous time for the gaming-dependent Macau economy. Data released Friday indicates the SAR’s economic output contracted 8.1 percent in the fourth quarter – prior to the COVID-19 outbreak – nearly double the originally forecast contraction of 4.4 percent. Last year, Macau’s economy decreased by 4.9 percent.

The Macau Gaming Inspection and Coordination Bureau (DICJ) is expected to release February GGR figures in the coming days, a report industry analysts are anticipating will be dismal.

JPMorgan said first- and second-quarter earnings reports from Macau operators “will be of little importance, given the virtual lack of earnings” and that a recovery there may not materialize in earnest until the last three months of this year.