The International Air Transport Association forecast Indonesia' aviation passenger demand sector could drops 33 percent or around 45.35 million in this year against 2019 - Photo by IATA

JAKARTA (TheInsiderStories) – The International Air Transport Association (IATA) forecast Indonesia’ aviation passenger demand sector could drops 33 percent or around 45.35 million in this year against 2019. It also prediction the revenues impact worth of US$6.4 billion and the potential job losses 1.57 million.

The predictions are based on a scenario where severe restrictions on travel are lifted after three months, followed by gradual recovery, said the agency in an official statement released on April 3. For that, IATA is urging Indonesia and Asia – Pacific (APAC) states to take urgent action to provide financial support to their airline industry impacted by the COVID-19 crisis.

It said, major APAC countries could see passenger demand in 2020 reduced by between 34 to 44 percent.  In detailed, Cambodia (-34 percent), Vietnam (-34 percent) and the Philippines (-36 percent) will be on the lower end of the range, while Thailand (-40 percent), Pakistan (-40 percent), Republic of Korea (-40 percent) and Sri Lanka (-44 percent) will see the largest impact.

“Based on a scenario in which severe travel restrictions last for three months, the Asia-Pacific region as a whole will see passenger demand reduced by 37 percent this year, with a revenue loss of $88 billion,” said Conrad Clifford, IATA’ Regional VP, Asia-Pacific.

He continued, “While each country will see varying impact on passenger demand, the net result is the same – their airlines are fighting for survival, they are facing a liquidity crisis, and they will need financial relief urgently to sustain their businesses through this volatile situation.”

In its latest analysis, IATA expects airlines to post a net loss of $39 billion during the second quarter ending June 30, 2020. The impact of that on cash burn will be amplified by a $35 billion liability for potential ticket refunds. Without relief, the industry’ cash position could deteriorate by $61 billion in the second quarter Australia, New Zealand and Singapore have announced a substantial package of measures to support their aviation industry.

“But others in the region, including India, Indonesia, Japan, Malaysia, the Philippines, Republic of Korea, Sri Lanka and Thailand, have yet to take decisive and effective action. Jobs as well as the GDP supported by the industry are at risk,” said Clifford.

He added, governments need to ensure that airlines have sufficient cash flow to tide them over this period, by providing direct financial support, facilitating loans, loan guarantees, and support for the corporate bond market. Taxes, levies, and airport and aeronautical charges for the industry should also be fully or partially waived, said the official.

Its critical that these countries still have a viable aviation sector to support the economic recovery, connect manufacturing hubs and support tourism when the COVID-19 crisis is over. They need to act now – and urgently – before it is too late,” said Clifford.

Based on IATA data, global passenger traffic data in February 2020 showing that total revenue passenger kilometers) fell 14.1 percent compared to same month in 2019. This was the steepest decline in traffic since 9.11 and reflected collapsing domestic travel in China and sharply falling international demand to/from and within the Asia-Pacific region, owing to the spreading COVID-19 virus and government-imposed travel restrictions.

February capacity (available seat kilometers) fell 8.7 percent as airlines scrambled to trim capacity in line with plunging traffic, and load factor fell 4.8 percentage points to 75.9 percent.

“Airlines were hit by a sledgehammer called COVID-19 in February. Borders were closed in an effort to stop the spread of the virus. And the impact on aviation has left airlines with little to do except cut costs and take emergency measures in an attempt to survive in these extraordinary circumstances,” aid Alexandre de Juniac, IATA’ director general and CEO.

The 14.1 percent global fall in demand is severe, but for carriers in Asia-Pacific the drop was 41 percent, he stated. And it has only grown worse. Without a doubt this is the biggest crisis that the industry has ever faced.

International Passenger Markets

In February, international passenger demand fell 10.1 percent compared to February 2019, the worst outcome since the 2003 SARS outbreak and a reversal from the 2.6 percent traffic increase recorded in January. Europe and Middle East were the only regions to see a year-over-year traffic rise. Capacity fell 5.0 percent, and load factor plunged 4.2 percentage points to 75.3 percent.

Asia-Pacific airlines’ February traffic plummeted 30.4 percent compared to the year-ago period, steeply reversing a 3.0 percent gain recorded in January. Capacity fell 16.9 percent and load factor collapsed to 67.9 percent, a 13.2-percentage point drop compared to February 2019.

In the same month, European carriers’ demand was virtually flat compared to a year ago (+0.2 percent), the region’ weakest performance in a decade. The slowdown was driven by routes to/from Asia, where the growth rate slowed by 25 percentage points in February versus January.

Demand  in markets within Europe performed solidly despite some initial flight suspensions on the routes to/from Italy. However, March data will reflect the impact of the spread of the virus across Europe and the related disruptions to travel. February capacity rose 0.7 percent, and load factor slipped 0.4 percentage point to 82.0 percent, which was the highest among regions.

Middle Eastern airlines posted a 1.6 percent traffic increase in February, a slowdown from the 5.3 percent in annual basis growth reported in January largely owing to a slowdown on Middle East-Asia-Pacific routes. Capacity increased by 1.3 percent, and load factor edged up 0.2 percentage point to 72.6 percent.

North American carriers had a 2.8 percent traffic decline in February, reversing a 2.9 percent gain in January, as international entry restrictions hit home and volumes on Asia-North America routes plunged 30 percent. Capacity fell 1.5 percent, and load factor dropped 1.0 percentage point to 77.7 percent.

Latin American airlines experienced a 0.4 percent demand drop in February compared to the same month last year. This actually was an improvement over the 3.5 percent decline recorded in January. However, the spread of the virus and resulting travel restrictions will be reflected in March results. Capacity also fell 0.4 percent and load factor was flat compared to February 2019 at 81.3 percent.

African airlines’ traffic slipped 1.1 percent in February, versus a 5.6 percent traffic increase recorded in January and the weakest outcome since 2015. The decline was driven by around a 35 percent year-on-year traffic fall in the Africa-Asia market. Capacity rose 4.8 percent, however, and load factor sagged 3.9 percentage points to 65.7 percent, lowest among regions.

Domestic Passenger Markets

Demand for domestic travel dropped 20.9 percent in February compared to February 2019, as Chinese domestic market collapsed in the face of the government lockdown. Domestic capacity fell 15.1 percent and load factor dropped 5.6 percentage points to 77.0 percent.

Chinese airlines’ domestic traffic fell 83.6 percent in February, the worst outcome since IATA began tracking the market in 2000. With the easing of some restrictions on internal travel in March, domestic demand is showing some tentative signs of improvement.

US airlines enjoyed one of their strongest months in February, as domestic traffic jumped 10.1 percent. Demand fell  toward the end of the month, however, with the full impact of COVID-19 expected to show in March results.

The Bottom Line

“This is aviation’ darkest hour and it is difficult to see a sunrise ahead unless governments do more to support the industry through this unprecedented global crisis. We are grateful to those that have stepped up with relief measures, but many more need to do so. Our most recent analysis shows that airlines may burn through $61 billion of their cash reserves during the second quarter.

This includes $35 billion in sold-but-unused tickets as a result of massive flight cancellations owing to government-imposed travel restrictions. He noted,” We welcome the actions of those regulators who have relaxed rules so as to permit airlines to issue travel vouchers in lieu of refunds for unused tickets and we urge others to do the same.”

Air transport will play a much-needed role in supporting the inevitable recovery. But without additional government action today, the industry will not be in a position to help when skies are brighter tomorrow, said de Juniac.

Edited by Staff Editor, Email: theinsiderstories@gmail.com