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COVID-19 Aviation Impact: CAPA Daily Update – 10-Mar-2020

Analysis

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

Top news headlines:

- China’s CAAC announces a range of additional measures to support the aviation industry during the coronavirus outbreak;

- Australia’s Qantas Group announces further cuts to its international flying, reducing capacity by almost a quarter, for the next six months.

- JetBlue Airways reports it is removing all guidance for 1Q2020 and FY2020, due to continued uncertainty surrounding the coronavirus.

The latest Novel Coronavirus (COVID-19) Global Situation

105 countries now affected

Albania and Paraguay were added to the list of countries reporting COVID-19 cases, taking the total to 105.

Top ten locations for COVID-19 (09-Mar-2020)

Top ten locations by daily cases increase (09-Mar-2020)

Air Capacity Update: SPAIN - capacity reductions likely as the virus strikes

COVID-19 cases surged in Spain, with 410 new cases reported for a total of 999 – a 70% increase on the previous day.

Spanish air capacity is down just over 4% in the current week year-on-year – and airlines have filed capacity plans broadly in line with 2019 levels in coming weeks. This outlook could now be revised.

Spain weekly total by system seat capacity w/c 09-Mar-2020

Aviation & Travel Industry updates

1. Global:

UNCTAD projected (08-Mar-2020) the coronavirus epidemic could bring global foreign direct investment flows to their lowest levels since the 2008-2009 financial crisis,

This would cause global foreign direct investment (FDI) to shrink by 5% to 15%.

The UN trade body had projected earlier a stable level of global FDI inflows in 2020-2021 with a potential increase of 5%
The negative impact on investments will be felt strongest in the automotive, airlines and energy industries.
According to UNCTAD, earnings forecasts for fiscal year 2020 for airlines among the the top 5,000 listed companies have declined 42%.
 

2. Asia:

China:

CAAC announces (09-Mar-2020)  additional measures to support the aviation industry during the coronavirus outbreak: 

  • Exempt airlines from contributing to the civil aviation development fund;
  • Previously announced financial support to encourage international route operations;
  • Reduce airport and air control charges, effective from 23-Jan-2020;
  • Encourage State owned supplier companies to reduce charges;
  • Increase infrastructure investment, targeting CNY100 billion investment in fixed assets throughout the year;
  • Extend the 2019/2020 winter schedule until 02-May-2020;
  • Suspend evaluation of airline on time performance;
  • Shorten approval for applications to resume international operations. [more - original PR - Chinese]

Australia / New Zealand:

Qantas plans to reduce its Group international network by "almost a quarter for the next six months"

Qantas reports (10-Mar-2020) plans to reduce its Group international network by "almost a quarter for the next six months" in response to coronavirus. Additional changes to its international network will bring total capacity reduction from 5% to 23% year-on-year, with extensions to Sep-2020. 
Qantas Group plans to reduce its Asia network by 31%, US network by 19%, UK by 17% and trans Tasman by 10%. Qantas group will reroute London service with double daily Perth-London non-stop, and downgauge aircraft in efforts to avoid exiting routes, as well as bring forward maintenance on its fleet where possible. [more - original PR]

Qantas reported (10-Mar-2020) the following cost reduction measures across the Qantas Group:

  • Annual management bonuses set to zero for FY2020;
  • For the remainder of FY2020;
    • Qantas Chairman will take no fees;
    • Group CEO will take no salary;
    • Qantas Board will take a 30% reduction in fees;
    • Group Executive Management will take a 30% pay cut;
  • Freeze of all non-essential recruitment and consultancy work;
  • Ask all Qantas and Jetstar employees to take paid or unpaid leave in light of reduced flying activity. [more - original PR]

South Korea:

Korean Air: President Woo Kee-hong: "may reach the threshold where we cannot guarantee the company’s survival"

In a message to employees, Mr Woo stated more than 80% of the carrier's international capacity has been cut as a result of global travel restrictions due to the outbreak of coronavirus (Reuters, 09-Mar-2020).

According to Mr Woo, the carrier has grounded approximately 100 of 145 passenger aircraft and is implementing a series of measures, such as deferring investments, cutting back on operational expenses and encouraging employees to take voluntary leave. Despite these measures, Mr Woo stated: "If the situation continues for a longer period, we may reach the threshold where we cannot guarantee the company’s survival".

3. Middle East:

Qatar: temporary suspension of entry for travellers from 14 countries as a precautionary measure

Qatar's Government Communications Office announced (08-Mar-2020) the temporary suspension of entry for travellers from 14 countries as a precautionary measure against the outbreak of coronavirus.
The countries comprise Bangladesh, China, Egypt, India, Iran, Iraq, Lebanon, Nepal, Pakistan, Philippines, South Korea, Sri Lanka, Syria and Thailand.
The decision affects all individuals intending to enter from these countries, including visas upon arrival, those with a residence or work permit and temporary visitors. [more - original PR]

4. Europe:

Call for general waiver to the EU Slot Regulation's 'use-it-or-lose-it' airport slot rule

European Airport Coordinators Association (EUACA) called (09-Mar-2020) for EU regulators to grant a general waiver to the EU Slot Regulation's 'use-it-or-lose-it' rule from late Feb-2020/early Mar-2020 until late Jun-2020 due to the outbreak of the coronavirus and its impacts on bookings and capacity.
At present, the rules for slot allocation require airlines to operate at least 80% of their allocated slots under normal circumstances. The EUACA also called for a provision for a possible extension to the waiver in the event that the coronavirus outbreak continues to impact on bookings and capacity. [more - original PR]
 

5. North America:

JetBlue Airways 09-Mar-2020) removing all guidance for 1Q2020 and FY2020, due to continued uncertainty surrounding the coronavirus.

While RASM was experiencing solid trends up until late Feb-2020, these trends have worsened and become unstable during the past two weeks, with 1Q2020 booked at 87% of revenue forecast and 2Q2020 booked at 22%. In order to deal with the coronavirus impact on travel demand, JetBlue is adjusting schedules between Mar-2020 and early May-2020, evaluating further capacity reductions and reducing its spending.

Other actions also include freezing non essential spend, considering voluntary time off programmes, delaying hiring, reducing capacity growth and decreasing non aircraft CAPEX. The airline believes it has one of the strongest balance sheets in the industry, and will focus on protecting liquidity levels. As of 06-Mar-2020, it had USD1.2 billion in unrestricted cash, cash equivalents and short term investments and 34% of its fleet unencumbered. The carrier also possesses an undrawn committed revolver of USD550 million. [more - original PR]

Hawaiian Airlines also removing "operating revenue per ASM guidance for 1Q2020"

Hawaiian Airlines reported (09-Mar-2020) it is experiencing demand reductions due to the spread of coronavirus, leading it to withdraw operating revenue per ASM guidance for 1Q2020. The airline estimates RASM will drop 12% year-on-year if no new net bookings are recorded for Mar-2020. Guidance for 1Q2020 is now as follows:

  • ASMs: Guidance maintained at +7.5% to +10.5%, due to the balance of suspended service to South Korea with increased capacity on North American routes;
  • CASM, excl fuel and non recurring items: Maintained at -1.5% to -4.5%;
  • Fuel consumption: Maintained at +4.5% to +7.5%;
  • Fuel cost: Revised to USD1.87, compared to previous guidance of USD1.97. [more - original PR]

6. Latin America:

ALTA announces the impact of the coronavirus does not yet show in Latin American numbers

ALTA announced (06-Mar-2020) Latin America does not yet show in numbers the impact of the coronavirus, except for some affected routes to Europe and Asia.

However, analysis presented by IATA estimates that in 2020 global passenger traffic will reduce between 11% and 19% and the passenger transport industry will have revenue losses between USD63 billion and USD113 billion, still having to confirm the losses in cargo.                                                                                                                                                                                          ALTA requested the following from aviation stakeholders in the region

  • Maintain a fluid contact with the airlines in order to effectively inform and coordinate any income control measures or health forms required by the different States;
  • Flexibility in airport slot allocation rules as an exceptional measure to ensure that low demand or cancelled flights do not affect airlines’ historical compliance required for the planning of the next flight season;
  • Reduce overall costs to the industry to mitigate the impact of this exceptional situation. These include taxes, fees and charges throughout the airline production chain;
  • Adjust work conditions as a contingency measure to secure industry jobs during this public health emergency. [more - original PR]

7. Africa:

Air Tanzania postpones plans to commence charter services to China due to the coronavirus outbreak 

As previously reported by CAPA, the airline was expected to commence Hangzhou charter operations in late Feb-2020. (Reuters, 09-Mar-2020).

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

Additional Analysis

Qantas Sunrise's corona boost to Perth-London corporate non-stop

The threat of picking up coronavirus at stopovers en route to London has delivered Qantas a major endorsement of its Sunrise strategy.

As part of a large scale readjustment of its international flying, the airline will increase its Perth-London non-stop service from once daily to double daily, effective 20-Apr-2020.

For decades Qantas has had to compete with high quality intermediate (“Sixth Freedom”) airlines like Singapore Airlines on all of its westbound and northbound services.

The introduction of its Sunrise flights meant that passengers between Perth and London could dispense with an intermediate stop, at the same time offering Qantas a competitive advantage.

Read more at Qantas Sunrise's corona boost to Perth-London corporate non-stop

COVID-19 aviation impact threatens Japan’s 2020 tourism ambitions

The COVID-19 coronavirus outbreak has decimated many Asian airline markets, but for Japan the timing of the demand plunge is particularly unfortunate. This is supposed to be a big year for the Japanese aviation and tourism sectors, as they have planned for a significant surge in visitor traffic.

The government has made tourist growth an economic priority, and has backed this up with an expansion of Tokyo airport capacity this year to coincide with the summer Olympics coming to the city.However, the ambitious plans of the government and airlines for 2020 are now under threat from the coronavirus crisis.

COVID-19 forces US airlines to start pulling down capacity

The wide ranging effects of the Coronavirus COVID-19 on the global aviation continue unabated, forcing a significant shift in IATA's estimates for the revenue hit that airlines will take as the virus continues to rapidly spread. 

In the US, United has taken an unprecedented move and pulled down significant domestic and international capacity for Apr-2020, and JetBlue has also slashed its capacity. 

With those moves, the question is not if, but when, other US airlines will follow suit as demand continues to diminish unabated. Southwest Airlines, which does not offer long haul international flights, has recently cited a sharp drop in demand. 

Read more at COVID-19 forces US airlines to start pulling down capacity

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.

MEDIA – If you are seeking further commentary on this topic, please contact our Marketing Team.

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