The Coronavirus Effect: Asian Aviation in Dismay

By Ankur Deo | April 1, 2020

Every aviation trade association continues to push their respective governments for bailouts to keep the aviation industry from sinking under the weight of the global pandemic.

The Airports Council International (ACI) Asia-Pacific stated on March 27, 2020 that it was urging governments across the Asia-Pacific and Middle East regions to swiftly implement relief measures to airports and airlines in both regions. Their latest forecasts show that airports in the Asia-Pacific region could lose $23.9 billion in revenue and those in the Middle East could lose $5.7 billion. The International Air Transport Association (IATA) has estimated the airlines globally can lose more than $250bn in revenue this year, almost half of which is the share contributed by Asian Aviation.

Aircraft parked at Hong Kong International Airport ©Business Insider

Darren Hulst, Vice president and global head of marketing, Boeing Commercial, has stated:

‘Air traffic in China and other Asia Pacific countries has plummeted by more than half due to coronavirus scare. China used to witness as many as 15,000 departures on an average in a normal day, and now, that the whole of Asia doesn’t even account for third of that. These are rough numbers’

In India, the third largest market for aviation by market size, all of aviation has been brought to halt for more more than a week. Cash reserves are running down quickly as fleets are grounded. As for the non-LCC sector of India, AirAsia India and Vistara have continuously posted operating losses between Financial Year 2015 and 2019. While both airlines are owned partly by Tata Group, the parent conglomerate is now in a tough position, saving two airlines at once. Since both these carriers were making substantial losses even prior to the COVID-19 struck, they had little to no reserve capital to survive.

Talking about Air India, the beleaguered flag bearer, the airline was already in trouble and the government was looking for options to sell it. With the lack of capital in aviation sector, it is almost inevitable that Air India will shut down. India’s leading LCCs: IndiGo and GoAir, have made it clear that without more help from the government (that is, in addition to the $1.6b tax concession), both these airlines will run into serious trouble in months to come.

Aircraft parked on one of the runway in Delhi International Airport. ©BigNewsNetwork

China appears to be bouncing back, with flight cuts being reversed and services added, however, international travel restrictions imposed by almost all other nations implies that the Chinese aviation still continues making losses. Aviation in Hong Kong is still grounded as Cathay Pacific and airlines owned by the HNA Group are struggling to find the necessary cash to keep the operations going. The last domino fell when the Middle Eastern giant: Emirates, called it a day and suspended operations.

A spokesman for Pakistan International Airlines said losses and debt have become too much for the company to handle alone and that options suggested to the government include a debt-to-equity swap and long-term bond issue. While Asiana Airlines said it secured a bridge loan and will receive $1.3 billion from Korea Development Bank and other creditors, the airlines relies heavily on the hope that air traffic shall return to normal by May-June 2020, which, considering present scenarios, does not look likely.

Aviation in South Korea has been brought to a standstill. ©Reuters

With travel restrictions imposed by almost every country in Europe, the Americas and within Asia, the skies today are almost devoid of any Asian commercial jets. With one of the largest aviation industries struggling to get back on its feet, the message presented by the crisis is clear: Only The Fittest Shall Survive.

And currently, fittest are those who can secure the necessary government support.

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