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COVID-19 Aviation Impact: CAPA Daily Update – 16-Mar-2020

Analysis

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

Top news headlines:

- US suspends travel from UK and Ireland from 16-Mar-2020, adding to the Schengen blackout;

- WTTC: Coronavirus puts 50 million jobs at risk, 'strong policies' needed for quick recovery;

- EC amends EU slot regulations protecting airlines' grandfather rights until Jun-2020.

The latest Novel Coronavirus (COVID-19) Global Situation

145 countries now affected

A variety of new countries have reported COVID-19 cases, taking the total to 145. These countries include:

Ghana Reunion Guinea
Kazakhstan Antigua & Barbuda Jersey
Kosovo Aruba Rwanda
Guadeloupe Cayman Islands Saint Vincent & the Grenadines
Guyana Cuba Seychelles
Kenya Curacao Sudan
Central African Republic Eswatini Suriname
Uzbekistan Ethiopia Trinidad & Tobago
Saint Lucia Guatemala Uruguay

Top ten locations for COVID-19, excluding China (16-Mar-2020)

China cumulative cases (16-Mar-2020)

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

Global cumulative cases excluding China (16-Mar-2020)

Air Capacity Update: Spotlight on Netherlands

The number of cases for the Netherlands has increased dramatically over the weekend, with almost 140% new cases. The small European country, home to national carrier KLM Royal Dutch Airlines, recorded the largest percentage increase of European countries.

Capacity to the country has already been affected with further reductions expected this week. 

Netherlands weekly total system seats capacity w/c 16-Mar-2020

KLM Royal Dutch Airlines announced plans to reduce total capacity by 25% in Mar-2020 and around 30% to 40% from Apr-2020 to Jun-2020 in response to the coronavirus outbreak. The previous tentatively planned increase shown in the graph will not occur.

KLM Royal Dutch Airlines weekly total system seats capacity w/c 16-Mar-2020

Aviation & Travel Industry updates

1. Global:

WTTC: Coronavirus puts 50 million jobs at risk, 'strong policies' needed for quick recovery

World Travel & Tourism Council (WTTC) reported (13-Mar-2020) up to 50 million jobs in the travel and tourism sector are at risk due to the COVID-19 pandemic. The council stated global travel could be adversely impacted by up to 25% in 2020, equivalent to the loss of three months of global travel.

This could lead to a corresponding reduction in jobs of 12% to 14%. WTTC is calling for governments to implement "strong policies for a prompt recovery", including the following:

  • Improve travel facilitation: Remove or simplify visas wherever possible, reduce visa costs and improve processing times where practical, accept other visas when appropriate and introduce more efficient technologies for seamless and secure travel;
  • Remove barriers: Ensure that unnecessary barriers are removed or relaxed to alleviate pressure at ports and airports, including temporarily lifting the '80/20' airport slot rule, and implement flexible working visas for the industry in countries with existing limitations, especially in hospitality and tour operation;
  • Ease fiscal policies: Reduce and remove travellers' taxes which increases the cost of travel, such as air passenger duty and similar airport, port and hospitality taxes;
  • Introduce incentives: Introduce relief and incentives to support business continuity for companies which are most negatively impacted by the virus. SMEs in particular will take longer to recover;
  • Support destinations: Increase budgets and assign resources for promotion, marketing and product development in destinations when they are ready to welcome visitors again. [more - original PR]

2. Asia:

Hong Kong: Hong Kong Airport records 68% pax decrease in Feb-2020

Hong Kong International Airport reported (15-Mar-2020) the following traffic highlights for Feb-2020:

  • Passengers: 1.9 million, -68% year-on-year;
  • Cargo: 251,000 tonnes, -8.9%;
  • Aircraft movements: 18,005, -44.5%. [more - original PR]

Australia / New Zealand: Australia further restricts non essential travel and public gatherings

Australia's Prime Minister Scott Morrison advised (13-Mar-2020) against all non-essential, organised public gatherings of more than 500 people and upgraded Smartraveller advice for all Australians travelling overseas to level 3: 'reconsider your need for overseas travel at this time'. 
Australia's Government reported regardless of destination, age or health, if overseas travel is not essential, passengers should consider carefully whether now is the right time. [more - original PR] [more - original PR - II]
 

3. Middle East:

UAE suspends issuance of all entry visas due to outbreak of coronavirus

Dubai Airports announced (15-Mar-2020) UAE's Federal Authority for Identity And Citizenship temporarily suspended the issuance of entry visas to all foreigners except those holding a diplomatic passport, effective 17-Mar-2020 (Emirates News Agency).
This move comes as part of the precautionary measures taken by the UAE in response to the World Health Organisation's declaration of COVID-19 as a pandemic. The decision does not apply to those who already have their visas issued prior to the 17-Mar-2020. [more - original PR]
 

4. Europe:

EC amends EU slot regulations protecting airlines' grandfather rights until Jun-2020

European Commission (EC) announced (13-Mar-2020) plans to amend EU Regulation (EEC) No 95/93 to ensure grandfathering rights of carriers for airport slots not used during the period from Mar-2020 to Jun-2020 for all air traffic movements. Additionally, given the impact of the outbreak of the coronavirus initially in China and Hong Kong, the EC proposes to protect during a longer overall period the grandfathering rights for slots used for air services to and from these markets, effective retrospectively from 23-Jan-2020.
 
The decision is in response to the "serious impact" of the coronavirus on passenger demand globally and the likelihood that without the amendment, carriers would continue to operate services with very low load factors in order to protect their grandfather rights, exacerbating financial losses and causing an adverse impact on the environment.
 
Regulation 95/93 contains a 'use-it-or-lose-it' rule, whereby carriers must use at least 80% of their allocated slots within a given scheduling period in order to keep precedence of those slots within the corresponding scheduling period of the following year.
 
The EC noted carriers are experiencing a 40% to 60% year-on-year drop in forward bookings for the period Mar-2020 to Jun-2020 for non-Italian routes, with a somewhat larger impact on short-haul than long-haul routes. Bookings on Italian routes have decreased more than 50% in early Mar-2020 with load factors as low as 40%. Based on Eurocontrol data, the Commission also noted that the situation will last "at least for the months of Mar/Apr/May/Jun-2020". [more - original PR]

5. North America:

US suspends travel from UK and Ireland from 16-Mar-2020

US President Donald Trump announced (14-Mar-2020) the suspension of entry into the US of all foreign travellers who were physically present within the UK or Ireland during the 14 days prior to their intended entry into the US, in order to restrict the spread of coronavirus.
This proclamation is effective from 11:59 pm on 16-Mar-2020, until terminated by Mr Trump. [more - original PR]

6. Latin America:

Avianca to cut capacity between 30% and 40% ahead of coronavirus' softer demand market

Avianca Holdings announced (13-Mar-2020) immediate measures to manage the impact of reduced demand for global air transport resulting from the spread of the coronavirus (COVID-19) and related government travel restrictions.
 
Avianca will decrease its capacity between 30% and 40% as of 14-Mar-2020. [more - original PR]

7. Africa

South Africa bans travel from high risk countries in response to coronavirus

South Africa's President Cyril Ramaphosa outlined (15-Mar-2020) the following measures in response to the COVID-19 epidemic:
  • Travel ban on foreign nationals from "high-risk" countries, including China, Germany, Iran, Italy, South Korea, Spain, the UK and US, effective 18-Mar-2020. Visas for visitors from these countries were cancelled from 15-Mar-2020 and previously granted visas were revoked;
  • Any foreign national who has visited a high risk country in the past 20 days will be denied a visa. All travellers who have entered South Africa from a high risk country since mid Feb-2020 will be required to present themselves for testing;
  • South African citizens advised to refrain from all forms of travel to or through high risk countries. South Africans returning from high risk countries will be subject to testing and self isolation or quarantine on return to South Africa;
  • Travellers from "medium-risk" countries, including Hong Kong, Portugal and Singapore, will undergo "high intensity" screening;
  • Surveillance, screening and testing measures will be strengthened at Cape Town International Airport, Durban King Shaka International Airport and Johannesburg Oliver R Tambo International Airport. [more - original PR]
 

The above is a selection of more than 150 news 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 (please click on the headings to go to the full story)

By the end of May-2020, most airlines in the world will be bankrupt.

Coordinated government and industry action is needed - now - if catastrophe is to be avoided.

As the impact of the coronavirus and multiple government travel reactions sweep through our world, many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants.

Cash reserves are running down quickly as fleets are grounded and what flights there are operate much less than half full.

Forward bookings are far outweighed by cancellations and each time there is a new government recommendation it is to discourage flying. Demand is drying up in ways that are completely unprecedented. Normality is not yet on the horizon.

The US government’s decision to initiate a travel ban covering the Schengen Area of Europe is essentially rubbing salt into the wounds the country’s airlines are suffering as the COVID-19 coronavirus has reached pandemic status, and that decision significantly raises the levels of uncertainty about when a recovery in demand will occur. 

As the country’s largest airlines American, Delta and United navigate the effects of the ban, they are also likely being forced to examine their long term view of how they plan to rebound once the pandemic is over. 

With US and world markets continuing to get pummelled, those airlines may need to change their judgement that COVID-19 is a “fear event” rather than an “economic event”. The public health emergency caused by COVID-19 has now turned into an economic crisis, whose duration is impossible to predict. 

Attempts to compare this black swan event to 9/11 or SARS could soon be rendered irrelevant as sports teams suspend their seasons and an increasing number of employees are being required to work from home. The economic reverberations will be deep, and the timing of any recovery is by no means yet within view.

The previous link between the profit cycles of Turkey's two biggest airlines broke in 2019. Turkish Airlines' operating margin halved, but Pegasus Airlines' operating margin almost doubled in 2019. For most of the past decade, in spite of their different business models and market segments, the two had followed a very similar margin cycle.

Total passenger numbers in Turkey grew by 3.4% in 2019, which was the slowest rate since traffic fell in 2016, and only the third time in 10 years when growth was not in double digit territory. International passenger numbers grew by 11.8%, but domestic passengers fell by 11.2%. Neither Turkish Airlines nor Pegasus achieved an increase in passenger numbers for the year.

The ultra-LCC Pegasus has a much lower unit cost than Turkish Airlines, but Turkish Airlines has a lower unit cost than many of the global full service airlines with which it competes.

Pegasus' much stronger margin in 2019 suggests that its low costs may give it more robustness when market conditions are more challenging. That theory may be tested once more in 2020 against the backdrop of COVID-19.

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.

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