Global aviation in crisis
March 04 2020 07:26 PM
By Alex Macheras
By Alex Macheras

By Alex Macheras

The industry is bracing for the first fall in global air travel in more than a decade. In IATA’s initial assessment of the impact, the organisation said it expected global demand for air travel to fall by 4.7% in 2020, the first overall decline since the global financial crisis in 2008-09.

The coronavirus crisis marks another dangerous period for airlines, which are already facing multibillion-dollar revenue losses as the disease hits demand. Airlines around the world are cutting routes, freezing pay and using smaller aircraft to cope with a further slump in bookings. Emirates is asking staff to take unpaid leave for up to a month at a time due to the rapidly spreading coronavirus that has led to flight cancellations around the world.

British Airways and Ryanair announced flight cuts on Monday, with BA dropping 432 flights between 16 March and 28 March, including one flight a day between London and New York as well as services to Italy, France, Germany and elsewhere in Europe. Ryanair, Europe’s biggest short haul carrier, said it was also cutting hundreds of services by cutting a quarter of its flights to and from Italy between March 17 and April 8.

Over 25,000 employees at Hong Kong-based Cathay Pacific will take unpaid leave to help the airline cope with the ongoing financial challenges now worsened by the Covid-19 outbreak. Cathay Pacific and subsidiaries Cathay Dragon and HK Express have cut their capacity by 40%, with over 60% of scheduled flights cancelled due to the outbreak. The three-week leave programme was offered in early February by CEO Augustus Tang in an internal memo. It will take place between March and June this year.

Singapore Airlines Group, which includes SilkAir and low cost carrier Scoot, have similarly suspended flights to mitigate the impact of the fall in demand. More than 3,000 scheduled return flights from February to May have been temporarily suspended.

Air France-KLM CEO Benjamin Smith said on Tuesday that plans to levy green taxes on aviation should be postponed because of the economic impact caused by coronavirus.

The airline boss told the Airlines4Europe conference in Brussels that the industry is being hit hard by the virus. “In view of the coronavirus outbreak, we are asking governments to suspend the introduction of new flight taxes. New taxes put extra pressure on us, for example in France and the Netherlands,” Smith said.

“All these taxes are imposed in the name of sustainability but the money is not being earmarked for that. It’s not truthful, it’s deceptive,” he added.

There are quite a few weak carriers around the world," Benjamin Smith said, explaining "I believe this will accelerate consolidation."

Globally, airlines took five years to return to profit after the 2001 terror attacks, losing more than $40bn, mainly in the US. In 2008, the aviation industry plunged back into negative losing $8bn as the financial crisis struck.

Airbus is reviewing its 2020 delivery targets, issued barely three weeks ago, amid the global spread of coronavirus. The European aircraft manufacturer has not yet revised its target, but several airline customers are now expected to defer deliveries, delaying the entry into service of new jets which in turn will cause fresh headaches for Airbus production.

Multiple airlines are seeking a temporary holiday from lease payments, especially those located in Asia.

JetBlue Airways of the US, which does not fly to Asia, was the first airline in the US to launch free rebooking options last week, as it became clear that cases were not isolated to China.

The number of flights to and from Australia has fallen by a fifth over the past six weeks. Australia barred non-residents who have been in China during the past 14 days from travelling to Australia. Qantas has said the virus will cost it up to $150mn, Virgin Australia and Air New Zealand expect it will cost up to $75mn each.

For cargo, global air freight markets show that demand, measured in cargo tonne-kilometre decreased by 3.3% in January 2020, compared to the same period in 2019.

“January marked the tenth consecutive month of year-on-year declines in cargo volumes. The air cargo industry started the year on a weak footing. There was optimism that an easing of US-China trade tensions would give the sector a boost in 2020. But that has been overtaken by the Covid-19 outbreak, which has severely disrupted global supply chains, although it did not have a major impact on January’s cargo performance. Tough times are ahead. The course of future events is unclear, but this is a sector that has proven its resilience time and again,” said Alexandre de Juniac, IATA’s Director General and CEO.

But the worst is still to come for the airline industry in terms of economic damage from the coronavirus outbreak, European bosses warned on Tuesday, but they predicted that travel demand could stabilise in the coming weeks.

“We have seen a drop in demand when you look particularly in the northern part of Italy, but that has also spilled over to the other parts of the network,” easyJet CEO Johan Lundgren said on the sidelines of this week’s Brussels conference.

IAG’s Walsh also noted a “very significant fall-off in demand” in Italian markets in the past week. But Walsh predicted demand would stabilise in coming weeks if bookings followed the pattern seen in Asia.

“I think we will see air traffic recover in due course,” he said.

With the entire industry grappling with the crisis, there’s very little airline activity that’s unrelated to the outbreak — and suspensions are set to continue as the situation changes every day.

For passengers still travelling: Follow government advice regarding the safety of the destination, make your own assessment, pack your hand sanitiser and wipes, and practise good personal hygiene. Flexibility in your travel plans is key, as new waivers, suspensions and bans are issued each and every day, causing an operational nightmare for airlines.

*The author is an aviation analyst.



Last updated: March 04 2020 08:00 PM


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