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V-shaped or pear-shaped economy ahead?
March 1st 2020
Little more than two months ago, the Asia-Pacific airline industry was looking at the beginning of 2020 with measured optimism. Read More » The International Air Transport Association (IATA) was predicting another 12 months of improved profitability and airline chiefs in the region were buoyed by an easing in trade war tensions between the U.S. and China, a key to improvement in the struggling and important air freight sector.
But that optimism has been dashed as the region’s largest aviation market, China, reels from the impact of the Novel Coronavirus epidemic, or COVID-19, on commercial airline business. It is now clear the epidemic is worse than the SARS (Severe Acute Respiratory Syndrome) outbreak in 2003.
There have been more deaths and more victims of the virus. To a great extent, China has been isolated from the rest of the world with many countries barring its citizens from entry. But thousands of cases have been confirmed across the region, in Japan, Singapore, Thailand, Korea, Australia and most recently, in the Gulf states and Europe. The virus has taken hold in dozens of countries well beyond the Asia-Pacific.
Billions of dollars have been wiped from the economies of Asia-Pacific nations which rely heavily on Chinese tourists and business. Airlines of course, have become a major casualty as passenger numbers plummet.
IATA’s preliminary estimate is the region’s airline industry is facing potentially US$57.3 billion in losses for the year. It will be the first annual decline in global passenger demand since the Global Financial Crisis of 2008-2009. There has been little that airlines can do to handle yet another event totally outside their control but to cancel flights, rearrange schedules and remove capacity from their operations.
Qantas Airways Group CEO, Alan Joyce, has gone as far as suggesting some airlines may not survive the crisis. Whether that happens remains to be seen, but the damage to the bottom line, particularly for those already struggling financially, will be significant.
If there are airline victims, it will probably depend on how long the outbreak lasts. As usual, carriers have responded to the emergency in the way they always do by lending a helping hand. They are making risky flights into China to rescue their stranded nationals or flying in medical supplies to hospitals treating victims.
Historically, the airline industry has proven to be resilient, but this period will be a severe test of their ability to overcome yet another crisis. Right now, we can only hope the SARS experience is repeated and that the crisis will last for no longer than six months, followed by a rapid return to normality.
TOM BALLANTYNE
Associate editor and chief correspondent
Orient Aviation Media Group
