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China becomes the largest aviation market in the world

Welcome to the latest edition of CAPA’s daily Coronavirus and Aviation global update. We offer this product to our active CAPA Members, as well as visitors to our website to help our industry navigate through this crisis.

The report contains a small selection of news briefs and CAPA commentary, on the US system and from each region.

Top news headlines:

- China officially becomes the largest aviation market in the world;

- IATA: Governments will need to work collaboratively to restart air travel.

Following the aviation summaries, the report contains the latest coronavirus data, globally and by country.

- Global cases increase by one million in 13 days;

- The US represents almost one third of total global COVID-19 cases.

Aviation & Travel Industry coronavirus news updates

Air Capacity Update: China officially the largest aviation market in the world

China has become the world's largest aviation market by seats as capacity in the US continues to be cut.

It has been predicted for some time that China will eventually take over from the US, which has held the position as long as aviation has existed, although no one could have predicted it would come this early.

The International Air Transport Association (IATA) had predicted the change would occur 2024; however the impact of the COVID-19 virus on aviation markets - and China's bounce back - brought forward this major turning point.

While the accolade is somewhat bittersweet, and probably temporary, the result does affirm the fact that China's aviation market is beginning to improve after being devastated by COVID-19.

Significantly, the entirety of the capacity in China is its domestic market which makes up more than 95% of the total. 

Countries and Territories ranked by system seats: w/c 13-Apr-2020

The graph below shows the difference a week can make, with the US being forced to cut almost 30% of its capacity dropping it below China.

Countries and Territories ranked by system seats: w/c 06-Apr-2020

The above is an example of future planned air capacity, available to CAPA Members from CAPA’s country profiles. For more information about CAPA Membership, please click here.Aviation & Travel Industry news updates

1. Global

IATA: Governments will need to work collaboratively to restart air travel

IATA director general and CEO Alexandre de Juniac said the airline association will organise a series of regional meetings in order to develop a plan to "restart" air travel and the airline industry, to be conducted in coordination with governments (Reuters, 14-Apr-2020).

According to Mr de Juniac, travel restrictions will need to be lifted jointly by governments as they cannot approve their citizens moving international "without having on the other side a state saying 'I am ready to welcome them'".

2. Asia

China: CAAC pax down 72%, all cargo airlines freight up 28% in Mar-2020, prior to the rapid recovery

CAAC reported (15-Apr-2020) the following preliminary traffic highlights for Mar-2020:

  • Passengers: 15.1 million, -71.7% year-on-year;
  • Cargo: 484,000 tonnes, -23.4%;
    • Freighter cargo: 253,000 tonnes, +28.4%;
  • Flight hours: 417,000, -58.8%;
  • Number of flights: 202,600;
    • Daily flights: 6535, -58.6%;
  • 1Q2020:

Japan: Skymark Airlines withdraws application to relist on Tokyo Stock Exchange

Skymark Airlines withdrew (15-Apr-2020) its application to relist on the Tokyo Stock Exchange, citing "rapid changes in the business environment following the global spread of the new coronavirus and recent trends in the stock market". The carrier submitted an application to relist on the stock exchange on 25-Oct-2019. [more - original PR - Japanese]

Australasia: Virgin Australia voluntary stock market suspension to remain in place for additional seven days

Virgin Australia requested (16-Apr-2020) its voluntary suspension on the ASX remain in place until the company makes an announcement to the market regarding this, or the expiry of seven days from 16-Apr-2020, whichever occurs first. [more - original PR]

3. Middle East:

Tehran Mehrabad Airport: Apr-2020 operations decrease 60%, pax -70%

Tehran Mehrabad Airport director general Ebrahim Moradi reported (15-Apr-2020) a 60% decrease in operations and a 70% passenger reduction year-on-year for Apr-2020, due to coronavirus impacts. [more - original PR - Persian]

4. Europe:

Russia to allocate EUR282m to support carriers

Russia's President Vladimir Putin stated (15-Apr-2020) it is necessary to allocate more than RUB23 billion (EUR281.5 million) to support air carriers, as an urgent and emergency measure. Mr Putin said the airline industry is facing serious difficulties as a result of the coronavirus outbreak. Mr Putin added: "In particular, these funds will be used to lease equipment, to finance working capital, salaries and to pay for aircraft parking". [more - original PR - Russian/English]

5. North America:

United Airlines: 'Travel demand is essentially zero', 'shows no sign of improving in the near term'

United Airlines CEO Oscar Munoz and president Scott Kirby reported (15-Apr-2020) the carrier is planning to reduce capacity to "about 10% of what had been planned for May at the beginning of this year", with "similar reductions" anticipated for Jun-2020. United's network has been reduced by 90%, and schedule reductions in May/Jun-2020 will create "direct consequences for our frontline employees in terms of total hours worked".
 
"Travel demand is essentially zero and shows no sign of improving in the near term", they cautioned, commenting that "even when travel demand starts to inch back, it likely will not bounce back quickly". Less than 200,000 passengers travelled with the carrier during the first two weeks of Apr-2020, representing a 97% year-on-year drop in demand, with even less passengers expected to travel "during the entire month of May than we did on a single day in May 2019".
 
"We expect demand to remain suppressed for the remainder of 2020 and likely into next year", they warned. [more - original PR]

6. Latin America:

LATAM Airlines Group requires financial support from governments to survive coronavirus impact

LATAM Airlines Colombia CEO Santiago Alvarez Matamoros reported LATAM Airlines Group "is making efforts to preserve cash as much as it can" but even with these measures "we are talking about having cash for around three to four months", after which the airline group will require financial support from governments to continue operating (Reuters/Reportur/Aviacion al Dia, 14/15-Apr-2020).

Mr Matamoros said "when we talk about aid we are not asking for a gift" from governments, but rather long term loans with subsidised interest rates to enable LATAM to survive the immediate impact of coronavirus and provide support during the "long and painful" recovery process. He said the airline group expects the recovery period to last between 18 and 24 months, noting "It will be a period when we will be burning through cash because we will be running flights with low prices and below-average passenger numbers".

7. Africa

AFRAA urges African governments to consider compensation, subsidisation of airlines

African Airlines Association (AFRAA) secretary general Abdérahmane Berthé, via the association's official newsletter, stated (Apr-2020) "AFRAA urges African governments to consider the compensation of inevitable losses, the alleviation of exogenous operating costs, and the subsidisation of the African airlines in a bid to assure the industry's viability", in view of the impact of the COVID-19 pandemic.

Mr Berthé also stated: "AFRAA strongly recommends that African airlines engage their stakeholders to develop an all-inclusive proactive response strategy that addresses the adverse impact of the COVID-19 on their business".

The above is a selection of more than 150 CAPA news updates today specifically on COVID-19, from today’s CAPA Membership coverage, which also covers traffic data, route and frequency announcements, government advisories and more. For more information about CAPA Membership, please click here.

Additional Analysis (please click on the headings to go to the full story)

Most airlines do not have a lot of time to focus on how the industry will be reshaped in a post-COVID-19 world. But there’s one overarching theme that emerges when they can take a step back and ponder how the industry will change after the crisis – markets will be smaller. 

The largest domestic airline in Brazil, GOL, believes that Latin America’s largest aviation market could potentially be smaller for some time after the pandemic ends, and that the crisis will force some airlines in the market to behave more rationally with capacity growth. For now, GOL is operating a skeleton schedule and has parked more than 100 aircraft. The airline also believes its planned international expansion will be delayed for some time. 

GOL’s competitor, Azul, which has also parked more than 100 aircraft, hopes to resume close to a normal operating schedule in Jul-2020, but as the crisis drags on it can only be speculated when any sense of normality will materialise. 

The withdrawal by the owner of LOT Polish Airlines from buying Condor highlights an understandable anxiety among airlines to commit any funds beyond what is needed for immediate survival in lockdown.

The European airline landscape has long been more fragmented, and less profitable, than in North America. The mega deals that could transform it face considerable barriers – regulatory, political, social and cultural.

The coronavirus crisis – deeper than any previously – might be expected to catalyse deals that overcome such barriers. Yet, even in these extreme circumstances, major consolidation is not imminent.

LOT-Condor is not a mega deal, but its abandonment illustrates how distant the prospect of a really significant takeover or merger is. Consolidation through airline bankruptcy is more likely, but state support could limit this to the exit of smaller airlines with little impact on overall European airline industry structure.

However, the depth of the current collapse in European seat capacity (down by 88.7% in the week of 13-Apr-2020) and the importance of international markets – likely to lag in the upturn – point to a slow and shallow recovery. That is likely to have a more profound impact on industry structure.

Will an aviation industry recovery be ‘V’, ‘U’, ‘W’ or ‘L’-shaped after the coronavirus is tamed?

For aviation, it is by now clear that “normal” is past history. CAPA’s COVID-19 Masterclass on 8-Apr-2020 began an exploration of what the journey to the new ‘normal’ will look like for the aviation industry.

After weeks of route cancellations amid increasing restrictions on mobility, the global aviation system, the lifeblood of intercontinental connectivity, has been reduced to a mere skeletal framework. Even that frame is becoming increasingly weak as the coronavirus pandemic continues to spread.

Airlines have moved quickly to make the necessary cuts to try and minimise their own exposure to what has become a global economic crisis. But now, as they come to terms with the current situation, attention must necessarily turn to the way out.

One hope is that China’s recovery trajectory could point the way for other countries.

The above is a selection of in-depth insights on the latest developments in the aviation and travel industry related to the COVID-19 outbreak. CAPA Membership includes a range of reports featuring accurate data and independent commentary from our global team of analysts, who offer a unique perspective and actionable insights to help improve decision making. For more information about CAPA Membership, please click here.

Coronavirus Situation Report

Global cases increase by one million in 13 days

Global cases of COVID-19 have spread very quickly around the world in April, with more than one million new cases diagnosed in the last 13 days. Global cases reached the one million mark on 03-Apr-2020 and exponentially grew from that point on, thanks in large to the spread through the US.  

209 countries are now affected

Confirmed COVID-19 cases by day (16-Apr-2020)

Confirmed COVID-19 cases by day, excluding China (16-Apr-2020)

The US represents almost one third of total global COVID-19 cases

Top ten locations for COVID-19 (16-Apr-2020)

Top ten highest increases in infections by location (16-Apr-2020)

Global cumulative cases (16-Apr-2020)

Global mortality rate (dark blue line) vs. key locations mortality rate (16-Apr-2020) 

Spread of virus is proving difficult to manage

The growth rate of the COVID-19 virus has differed greatly between countries depending on the measures in place to combat the spread.

Aggressive containment in countries like Japan and Singapore has slowed the pace of spread of the virus, while the US continues with the highest trajectory, as it comes late to lock downs - and even now, several states have still not done so.

The comparison below shows the growth rate per selected country once each has reached 100 cases - so there are different start dates e.g. that threshold was reached first for Japan, so that country was 27 days in.

Daily increase in COVID-19 cases, selected countries : Day 1 = 100 case threshold

Aggressive containment appears to slow the growth rate (daily counting starts once the country reaches 100 cases)

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