By: Air Traveller PH Staff
The Coronavirus (COVID-19) is not only taking a toll on human beings, but on businesses as well and one of them is the airline industry. Analysts predict that the COVID-19 has a bigger impact than 9/11. They also say that it may cost the whole industry $100 billion in loses. What was predicting as the air travel boom may already be taking a turn at this point. It is indeed no different in the Philippines.
Aside from the hotels and resorts, the Philippine commercial aviation industry is badly being hit by the COVID-19 outbreak. The Philippines' largest budget carrier, Cebu Pacific, has previously predicted that they may lose $78 million in profits. We are pretty sure all local airlines are concocting ways and means to cushion the blow of the outbreak.
First and foremost, flight cancellations and travel restrictions are causing the airlines huge loses. This is a force majeure situation imposed by the national government to prevent the spread of virus by restricting travel to affected countries. A travel ban had been issued for travel to mainland China, Hong Kong, Macau, and Taiwan. While the Taiwan travel ban has been lifted followed by Hong Kong and Macau, airlines have already cancelled services to and from those places until a certain date. Those places are major air traffic routes and up to 10% of an airline's revenue may come from China itself. So imagine the immediate impact on the balance sheets.
Second, low travel demand worldwide due to travellers' fear of the acquiring the virus have caused our local airlines to cut capacity by a significant number, particularly for international flights. The effect? Planes not flying with leases that are still moving, Under utilized aircraft are a huge no-no!
Third, lease and payments for new aircraft are running while they are not flying. In anticipation of the growth in air travel until 2035, many of the airlines have placed huge orders for mostly brand new aircraft. Philippine Airlines recently took delivery of its 8th Airbus A321NEO, PAL Express received its De Havilland DHC-8 turboprop, while Cebu Pacific continues to take delivery of its A321NEO and A320NEO aircraft. As more aircraft continue to come in, payments have to be made.
Fourth, manpower. Many of the flight crew and airport staff are under utilized, particularly the flight crew. Airlines continue to pay salaries while many of the pilots and flight attendants are not flying as much due to reduced number of flights. Big airlines like Cathay Pacific has already asked 27,000 of its employees to take unpaid leaves to cut costs. Hong Kong Airlines has retrenched around 160 employees, mostly flight deck and cabin crew.
So how are our local airlines PAL, Cebu Pacific, Philippines AirAsia coping with the situation and coming up with ways to cushion the blow?
First, the local airlines are now concentrating on domestic flights by encouraging local tourism through lower fares and new destinations. PAL and Philippines AirAsia have been adding more domestic flights from Manila and other hubs, particularly Clark and Cebu. These airlines have also been working with the country's Department of Tourism (DOT) to further promote local travel. Cebu Pacific is also offering lower than low fares to domestic destinations. With the help of the DOT, airlines are hopeful that they can gain bigger revenue from domestic flights.
It may take more than a year for airlines to recover once the COVID-19 threat has been placed under control but as of now, airlines are preparing for the worse that may come.
China flights are a huge revenue maker for our local airlines and we do not think this China travel restriction will not be lifted anytime soon. South Korea, also another large revenue marker for our local airlines may see flight restrictions being carried out. The Philippine Government has announced a directive banning travels to and from South Korea but has been placed on hold pending more study on its implementation and parameters.
For now, the best we can do is hope and pray that our medical experts can find a cure to the COVID-19 and this situation be finally placed under control.