CORONAVIRUS: More calls for aid as COVID-19 fallout continues to hammer Asian aviation

ACI APAC warns of US$23 billion loss in Asia; IATA calls for more airline support; AAPA stats show sharp drop in February pax traffic.

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Some lessors, like Singapore-based BOC Aviation and Ireland-based Standard Chartered Aviation Finance, have used their parents' financial backing to support customers and bolster their fleets by adding aircraft via large sale-and-leaseback deals. (PHOTO: Shutterstock)

Every aviation trade association continues to push governments around the world for bailouts to keep the industry from sinking under the weight of the COVID-19 coronavirus that has killed thousands of people and virtually shut down international air travel.

A screenshot of the virus tracking website at Johns Hopkins University. To access the live site click on the photo. (PHOTO: Matt Driskill)

Airports Council International (ACI) Asia-Pacific said on Friday (27 March) that it was urging governments across the Asia-Pacific and Middle East region to “swiftly implement relief measures” to airports in both regions because their latest forecasts show airports in the Asia-Pacific region could lose US$23.9 billion in revenue and those in the Middle East could lose US$5.7 billion. “A prolonged outbreak may result in a traffic volume loss in the range of 1.5 billion passengers for the Asia-Pacific region,” the association said.

ACI said first quarter losses alone in 2020 for regional airport could total US$5.6 billion, a large portion of which could come from contraction in traffic as well as non-aeronautical revenue. The impact on the Middle East will generate a loss of approximately US$1 billion for the first quarter and at least double for the full year, the council said.

“The updated analysis paints an extremely challenging picture for our airport members who have already burnt through about 10 percent of total yearly revenues in just three months. Every passenger lost by an airline is equally a passenger lost by an airport,” said Stefano Baronci, director general of ACI Asia-Pacific. “Relief measures are needed now for the sake of the entire aviation sector’s resilience to save jobs and allow economic recovery.”

ACI Asia-Pacific said it was calling on governments and regulators to act now and implement the following measures:

  • Alleviation of airport slots usage requirements until the end of June 2020: The temporary suspension of airport slot usage requirements would enable carriers to adjust their schedules in a sustainable way and for airports to protect connecting traffic at hub airports, safeguarding connectivity worldwide. Extension of the temporary suspension beyond June needs to be supported by continuous analysis and flexibly exercised per specific market conditions, as seen in China’s approach for international traffic and airline load factors.
  • Tax relief for the aviation sector: This includes suspension or deferment of social security contributions as well as corporate and other taxes (including VAT and excise duties). Suspension of all national and local aviation specific taxes, including passenger departing taxes.
  • Suspension or deferment of airport operators’ concession fees to governments: Governments need to consider, on a case-by-case basis, waiving airport rents and concession fees applicable to airport operators, irrespective of ownership status, given the financial stress they are experiencing.
  • Protection of airport revenues to finance operations, and bear high fixed cost: Airports are reliant on revenue from charges on airlines, passengers and commercial activities. Any global alleviation of airport charges or introduction of blanket discounts, therefore, will place airport operators in greater financial distress.
  • Government financial assistance: In some circumstances, seeking government subsidies to safeguard the ability of airport operators to contribute to economic growth and employment by ensuring current and future strategic investment in capacity, digitalization, accessibility and sustainability. These measures should be contemplated especially in support of regional airports.

IATA urges emergency support for airlines

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IATA Director General Alexandre de Juniac (centre) and other IATA officials address reporters in Geneva at IATA’s Media Day in December 2019. (PHOTO: IATA)

The International Air Transport Association (IATA) announced on Thursday (26 March) that it has written to the heads of government of 18 states in the Asia-Pacific region to appeal for emergency support to airlines as they fight for survival due to the dramatic loss of air travel demand due to the COVID-19 crisis. These states include Bangladesh, India, Japan, Malaysia, Pakistan, Philippines, Republic of Korea, Thailand and Vietnam.

“Airlines are fighting for survival in every corner of the world. Travel restrictions and evaporating demand mean that, aside from cargo, there is almost no passenger business. For airlines, it’s apocalypse now. And there is a small and shrinking window for governments to provide a lifeline of financial support to prevent a liquidity crisis from shuttering the industry,” said Alexandre de Juniac, IATA’s director general and CEO. “In a matter of days, the crisis facing airlines worsened dramatically. We are 100 percent behind governments in supporting measures to slow the spread of COVID-19. But we need them to understand that without urgent relief, many airlines will not be around to lead the recovery stage. Failure to act now will make this crisis longer and more painful. Some 2.7 million airline jobs are at risk. And each of those jobs supports a further 24 in the travel and tourism value chain. Some governments are already responding to our urgent calls, but not enough to make up the US$200 billion needed,” said de Juniac.

IATA is proposing a number of options for governments to consider. They include:

  • Direct financial support to passenger and cargo carriers to compensate for reduced revenues and liquidity attributable to travel restrictions imposed as a result of COVID-19;
  • Loans, loan guarantees and support for the corporate bond market by governments or central banks. The corporate bond market is a vital source of finance, but the eligibility of corporate bonds for central bank support needs to be extended and guaranteed by governments to provide access for a wider range of companies.
  • Tax relief: Rebates on payroll taxes paid to date in 2020 and/or an extension of payment terms for the rest of 2020, along with a temporary waiver of ticket taxes and other government-imposed levies.

“A growing number of governments in Asia-Pacific, including Australia, New Zealand, Singapore, have announced financial relief packages for the airline industry and we are grateful to them for the assistance rendered during this dark period for the airline industry. But we need more governments to come on board to support the airline industry serving their markets,” said Conrad Clifford, IATA’s regional vice president for Asia-Pacific.

AAPA: Passenger traffic slumps, cargo demand holding up

Air traffic in the Asia-Pacific region plunged in February, according to the latest data from the Association of Asia Pacific Airlines (AAPA) because of “deepening public anxiety about the COVID-19 pandemic and the abrupt imposition of travel restrictions across the world causing widespread disruptions to airline operations”.

The region’s airlines experienced a 43.9 percent year-on-year fall in the number of international passengers carried to a combined 17 million in February. As measured in revenue passenger kilometres (RPK), demand fell by 34.8 percent, alongside a 20.6 percent drop in available seat capacity. As a result, the average international passenger load factor tumbled by 14.4 percentage points to 66.6 percent for the month.

AAPA said air cargo demand “held up remarkably well” despite factory closures and lockdowns in China crippling the supply and distribution of manufactured goods nationwide and related international trade flows. These declines were partly offset by higher demand for air shipments of intermediate goods, including pharmaceutical and food supplies, within the region. Overall, Asia-Pacific airlines registered a 3 percent year-on-year decline in international air cargo demand in freight tonne kilometres (FTK) terms in February. Comparatively, offered freight capacity fell by a sharp 13.5 percent, with belly-hold capacity declining in tandem with the progressive cuts in the number of passenger flights over the course of the month. As a result, the average international freight load factor increased by 6.5 percentage points to 60.3 percent for the month.

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Andrew Herdman, AAPA’s outgoing director general.

“Asian airlines saw passenger demand for international air travel demand plunge in February as a result of the rapid spread of the COVID-19 coronavirus pandemic,” said  Andrew Herdman, AAPA’s director general. “Overall, for the first two months of the year, the number of international passengers travelling on Asian airlines fell by 21 percent to 50 million passengers.”

Herdman added: “Since February, we have seen a further sharp deterioration in the overall situation. As COVID-19 became a global pandemic, severe travel restrictions and falling demand have forced steep capacity cuts across the majority of airline route networks, with some airlines virtually halting all international flights, while others are planning to maintain minimal levels of connectivity by operating a small number of passenger services in the coming months. Asian airlines are also working closely with governments and related stakeholders to mount a number of humanitarian and evacuation flights to bring home stranded nationals.”

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