Covid-19 has, unexpectedly, triggered a wave of panic, with news channels broadcasting daily updates on the increasing death toll and the preventive measures- one of them being to avoid travelling – that has, in turn, tranquilized the economy. This sudden outrage of paranoia and fear, inevitably, is hampering the airlines so much so that it is affecting the aviator sector to a large extent.
Most affected by the steep decline are the airlines that rely on the Chinese market, such as Hong Kong’s Cathay Pacific Airways, Malaysia’s AirAsia Group, Philippine Airlines, and Garuda Indonesia.
According to CAPA’s analysis, China’s international airlines have already suffered a severe decline by 80% as compared to its booming industry last year. Singapore’s seat capacity has fallen from 1.75 million last February to around 1.35 million.
Hong Kong’s Cathay Pacific is bearing the brunt of the impact, cancelling over three-quarters of its weekly flights in March. Ivan Su, an analyst at Morningstar, claims that Cathay will report a heavy loss this year despite its finances. The flagship carrier, much to its dismay, asked its 27,000 employees to take unpaid leave for three weeks.
Another vulnerable carrier impacted by the rising wave of ‘travelling restrictions’ is AirAsia. Asia’s largest budget carrier was forced to suspend flights to the countries battling the virus such as China, Japan and South Korea.
According to MIDF, Chinese destinations make up between 25%-45% of AirAsia’s total net worth, while South Korea and Japan make up a combined 40%.
“In order to deal with the COVID-19 outbreak, AirAsia has planned the cancellation of non-profitable routes such as Tianjin, Lanzhou and Jaipur,” Adam Mohamed Rahim said in a research analysis.
Philippine Airlines, incurred losses widening to $208 million last year with the company warning that flight suspensions to the areas affected by the corona virus outbreak would further affect their economy.
To compensate for their depleting revenue, the company will test new flight routes, notably to Perth in Australia and Kota Kinabalu and Monado in Indonesia.
Indonesia airlines have implemented the suspension of flights to the country’s top two foreign destinations, Saudi Arabia and China. Indonesia’s travel ministry has banned all flight routes to China, affecting five local carriers- Garuda Indonesia, Citilink, Lion Air, Batik Air and Sriwijaya Air.
Saudi Arabia, announced that they would be barring hajj pilgrims from 16 countries including Indonesia, a Muslim dominated population, from entering the country.
Data from the International Civil Aviation Organization (ICAO) revealed that, approximately 70 airlines that cancelled all international flights to and from mainland China, and 50 others had limited their operations to China, summing up to an overall reduction of 40% airline capacity.
The conclusion that can be drawn from this analysis is that China had been the main source of revenue for numerous carriers such as the Cathay Pacific and AirAsia that have sustained losses worth millions due to the outbreak of COVID 19. Even after the outbreak is contained in China, the protests in the countries will continue to cloud the horizon for the carriers as Ivan Su said, “A slight decline in travel demand can already greatly affect airlines’ profitability.”
References
Mar 24, 2020
Sep 24, 2022
