Most airlines likely to pare back networks
Industry poised to shrink by up to 30%
published : 18 May 2020 at 05:30
newspaper section: Business
writer: Dusida Worrachaddejchai
Most airlines are expected to shrink their networks with more compact fleet sizes, while the aviation industry is predicted to be 20-30% smaller.
Aviation business in Thailand this year is forecast to see a sharp fall in passenger demand by 52% compared with 2019, while 2.1 million jobs in aviation and the tourism industry are at risk, according to the International Air Transport Association (IATA).
Albert Tjoeng, assistant director of corporate communications for Asia-Pacific at IATA, told the Bangkok Post all airlines regardless of business model and ownership structure are currently in survival mode, particularly airlines in Asia-Pacific, which is expected to see the largest revenue drop of US$113 billion this year.
Passenger demand in the region will plunge 50% year-on-year, which is worse than IATA's earlier prediction on March 24 of a 37% contraction.
IATA has developed two scenarios for the global aviation industry. For the baseline scenario, the domestic market will be the first to restart in the third quarter, followed by international markets at a much later stage.
Global passenger demand in 2021 will be 24% below pre-crisis levels in 2019 and this trend will continue until 2023, the association said.
For the pessimistic scenario, where the opening of economies and relaxation of travel restrictions is slow, with lockdowns extending into the third quarter, global passenger demand in 2021 will be 34% lower than 2019 levels.
Jeffrey Goh, chief executive of Star Alliance, said the global economy is forecast to be depressed, with the aviation industry facing downsizing of 20-30%. Recovery will be slow, especially for international tourism.
"Whether an airline will survive the crisis depends on how well it is managed, especially its finances," Mr Goh said.
He said the availability of a vaccine will help to restore confidence in travel, but it's unclear when an effective vaccine will be readily available. Even then, a period of very low economic growth is on the cards.
Airlines that have built a good cash reserve are more likely to manage getting through the crisis, said Mario Hardy, chief executive of the Pacific Asia Travel Association (Pata).
Other airlines will need a cash injection from their shareholders, either through the government or private sector.
"Airlines have to re-evaluate internal cost structure and future operations, which will mean most carriers have to operate a smaller network in the months and years to come," Mr Hardy said.
Speaking this week at the "Impacts of Covid-19 on Pata Visitor Forecasts 2020-2024" webinar held by Pata, Haiyan Song, associate dean and chair professor of tourism at Hong Kong Polytechnic University, said based on the pessimistic scenario, Thailand will face a 31% drop compared with the original forecast of 41.9 million arrivals, and will recover late in the second quarter of 2022.
The top source market, China, will drop 32.5% year-on-year to 7.5 million and start to recover in 2021 with 12.2 million, up 9.4%.
"International travel will not be the same after this pandemic due to health concerns," Mr Song said. "Asia will lead the way, recovering with a gradual opening up of economies and borders."