The Asia-Pacific is seen as the engine of future aviation growth, but the coronavirus pandemic has brought its airline sector to its knees.
Recent days have seen a collapse in air travel demand in the region. When news of coronavirus first emerged in Wuhan, China during January, comparisons were quickly drawn with 2003’s Severe Acute Respiratory Syndrome (SARS) crisis.
SARS had a major impact on the region’s carriers, sharply lowering traffic from February to May 2003. Cathay Pacific and Singapore Airlines grounded dozens of aircraft for a period as load factors cratered. While SARS was a cathartic event, it was largely an Asia-Pacific phenomenon in a less-globalised world. Air travel in Europe and the United States was largely unaffected.
Seventeen years on, the early stages of coronavirus saw a collapse in Chinese air travel as Beijing, waking up to the threat, deployed its full might to prevent the virus’s spread. Still, it was only in the second half of January when carriers outside of China started cutting flights to the disease’s epicentre, Wuhan. This was followed by massive domestic capacity cuts within China, and a sharp reduction in international services to the Mainland.
Coronavirus remained the overriding concern of Asia-Pacific airline chief executives throughout February with additional capacity cuts taking place. In Qantas’ half-year results released on 20 February, airline chief executive Alan Joyce noted weakening demand, adding that capacity to Asia would be reduced by 15%, domestic capacity by 2%, and on trans-Tasman services by 6%.
As the following weeks would show, these plans proved wildly optimistic as the coronavirus evolved from a regional issue into a global pandemic.
It emerged that long-haul, low-cost carrier AirAsia X, which has struggled at the best of times, was seeking lease payment deferrals to tide it over through the crisis. Sources at lessors note that a number of airlines were seeking some sort of relief.
By early March, travel restrictions were on the rise, with Singapore barring new visitors who had visited South Korea, Iran, or northern Italy in the previous 14 days. A cascade of restrictions and quarantines was soon to follow with countries across the region imposing either 14-day quarantines or banning new arrivals outright. Many nations have admonished citizens to avoid travel.
Snapshot: Asia-Pacific coronavirus impact
- China’s big carriers report that capacity dropped between 80-90% in February
- Qantas, Jetstar suspend all international flights
- Taiwan closes borders to foreigners
- Philippines imposes short-term suspension of domestic air travel from the main Luzon island group as a “community quarantine” measure.
- Jetstar Asia suspends all services from 23 March to 15 April
- Singapore Airlines halves capacity until end-April
- Vietnam to cease visa issuance for thirty days, adding to aggressive 14-day quarantine for many arriving passengers.
- Malaysia locks down border until 31 March, with citizens restricted from leaving the country, and foreign visitors and tourists to be denied entry.
- Air New Zealand cuts trans-Tasman capacity by 80%
- Cathay Pacific says that coronavirus will see an unaudited loss of HK$2 billion in February
- Korean Air says 80% of international capacity has been cut, grounds all 10 A380s
- Asia-Pacific deliveries collapse to just 11 aircraft during February
Airlines reeled. On 12 March Reuters reported a leadership message to Korean Air staff said that over 80% of international capacity had been cut, compared with just 18% during the Asian Financial crisis of 1997-1998. The memo, from president Woo Kee-hong, said coronavirus could affect the airline’s very survival.
Cathay Pacific, still reeling from anti-government protests in the second half of 2019, said that coronavirus would probably mean a loss of HK$2 billion ($129 million) in February, and that 90% of capacity across its network would be cut. At the same time, the SIA Group did not give a financial number, but said it carried 21.8% few passengers in February 2020 compared with a year earlier.
Things came to a head on 18 March, with SIA halving capacity and Jetstar Asia putting all services on hold from 23 March to 15 April.
As for Joyce’s remarks on 20 February, less than a month later on 19 March Qantas and Jetstar announced all international flights will be suspended from late March “until at least the end of May 2020,” following advice from the Australian government.
“The crisis lurches from day-to-day in unpredictable directions,” says Andrew Herdman, the outgoing director general of the Association of Asia Pacific Airlines. “Demand has shrunk or evaporated, largely because of travel restrictions and border closures, and the public trying to keep up with what you can or can’t do in terms of travel.”
While the earnings blow to the region’s airlines has yet to be calculated, early casualties could include certain aircraft types. Korean Air grounded all ten of its Airbus A380s until 25 April, a move following Qantas’s grounding of eight A380s for six months. A prolonged crisis could weigh on the future prospects of the superjumbo.
Reflecting the industry’s challenges, various countries are considering financial support for the airline industry.
Herdman adds that while domestic air travel in China is back to 50-60% of normal capacity, Chinese airlines have yet to beef up international routes, and are imposing quarantines for inbound travelers.
“I’m not of the camp that says this will change life forever,” he says. “As soon as people feel they can return to normal, they will re-establish normal behaviour. So, I’m confident there will be a full recovery.”