COVID-19 Aviation Impact: CAPA Daily Update – 19-Mar-2020
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:
- WTTC: World tourism and travel faces an 'existential threat' in coronavirus;
- Qantas Group suspends all international operations, stands down two thirds of staff;
- Delta Air Lines to reduce system wide capacity by 70%, introduce stricter cost savings.
The latest Novel Coronavirus (COVID-19) Global Situation
160 countries now affected
Kyrgyzstan, Montenegro, Zambia, Djibouti and the Gambia were added to the list of countries reporting COVID-19 cases, taking the total to 160.
Top ten locations for COVID-19, excluding China (19-Mar-2020)
Top ten highest increases in infections by location (19-Mar-2020)
China vs Global (excluding China) cumulative cases (19-Mar-2020)
Global mortality rate (yellow line) vs. key locations mortality rate (19-Mar-2020)
NEW: Daily increase in COVID-19 cases, selected countries : Day 1 = 100 case threshold
The growth rate of the COVID-19 virus has differed greatly between countries depending on the measures in places to combat the spread. Aggressive containment practises in countries like Japan and Singapore have slowed the pace of spread of the virus.
The comparison below shows the differing cases growth rate per selected country once it has reached 100 cases, so there are different start dates eg that threshold was reached first for Japan, so that country was 27 days in.
Aggressive containment appears to slow the growth rate (daily counting starts once the country reaches 100 cases)
Air Capacity Update: Middle East super connectors start to dry up
The Middle East hub has benefited from its geographical position at the centre of the world, providing opportunities for carriers such as Emirates to employ sixth freedom routing options for passengers.
With borders now closing across the globe, the region which relies heavily on transit traffic is feeling the impact. Capacity is expected to drop further, as international seats make up 80% of total capacity.
Middle East weekly total system seat capacity w/c 16-Mar-2020
Aviation & Travel Industry news updates
1. Global:
WTTC: World tourism and travel faces an 'existential threat' in coronavirus
World Travel & Tourism Council (WTTC) issued (17-Mar-2020) on open letter to governments, stating the travel & tourism sector is "uniquely exposed" to the coronavirus pandemic and the industry is "in a fight for survival" with an estimated 50 million jobs at risk globally. WTTC stated "now is the time to take action" and proposed three measures to be undertaken by governments:
- Financial help granted to protect the incomes of the workers in the sector "facing severe economic difficulties";
- Governments must extend "vital, unlimited interest-free loans" to global travel & tourism companies, as well as the millions of small and medium sized businesses as a stimulus to prevent them from collapse;
- All government taxes, dues and financial demands on the travel sector "need to be waived with immediate effect at least for the next 12 months". [more - original PR]
2. Asia:
China: China Southern Airlines Group pax down 86.4% to 1.7m in Feb-2020
China Southern Airlines Group reported (18-Mar-2020) the following traffic highlights for Feb-2020:
- Passengers: 1.7 million, -86.4% year-on-year;
- Domestic: 1.4 million, -86.4%;
- International: 232,720, -85.6%;
- Regional: 11,050, -95.2%;
- Passenger load factor: 47.1%, -38.1pp;
- Domestic: 46.8%, -38.8pp;
- International: 47.9%, -36.9pp;
- Regional: 35.0%, -41.9pp;
- Cargo: 56,970 tonnes, -35.4%;
- Domestic: 25,270 tonnes, -52.6%;
- International: 31,530 tonnes, -6.2%;
- Regional: 170 tonnes, -85.8%;
- Cargo load factor: 58.8%, +24.9pp;
- Domestic: 40.6%, +22.3pp;
- International: 62.8%, +17.2pp;
- Regional: 22.4%, +9.3pp. [more - original PR]
South Korea: South Korea MOLIT announces additional support measures for aviation industry
South Korea's Ministry of Land, Infrastructure and Transport (MOLIT) announced (18-Mar-2020) further countermeasures to support the country's aviation industry due to "unprecedented difficulty" from the coronavirus pandemic. The ministry estimates the measures will provide local airlines an exemption of KRW65.6 billion (USD52 million) worth of airport usage fees and allow later payments for KRW500.5 billion (USD399 million) worth of charges. Additional support measures include the following:
- The ministry will not reclaim unused traffic rights and slots as airlines continue to cut capacity due to travel restrictions placed by several countries. As of 17-Mar-2020, 150 countries and territories imposed restrictions on travellers from South Korea;
- Airport facility fees will be discounted;
- Due to the increasing number of aircraft being parked at airports, the ministry will exempt airlines from parking fees for three months from Mar-2020;
- Air navigation charges: Aircraft operating in Korea's airspace will be exempt from charges for three months from Apr-2020;
- Landing charges: Reduced by up to 20% for two months from Mar-2020. Previously, a reduction in landing charges was scheduled to come into effect from Jun-2020;
- Ground operators: 20% discount and deferred payment for three months;
- Airport ancillary services: Inflight meals and refuelling payment will be deferred by three months from Mar-2020. [more - original PR - Korean]
Australia/New Zealand: Qantas Group suspends all international operations, stands down two thirds of staff
Qantas reported (19-Mar-2020) the following coronavirus impacts:
- Qantas Group to suspend all international operations from late Mar-2020, with some ongoing ad hoc services available;
- Reduce domestic operations by 60%;
- Stand down 20,000 (two thirds of) employees to preserve jobs in the long term;
- AUD201 million (USD116.4 million) shareholder dividend payment deferred until Sep-2020. [more - original PR]
3. Middle East:
Egyptian airlines to lose USD142.9m due to suspension of international air traffic
Egypt's Prime Minister Mostafa Madbouly stated Egyptian airlines will lose more than EGP2.25 billion (USD142.91 million) following the Government's decision to suspend air traffic between 19-Mar-2020 and 31-Mar-2020, as a precautionary measure against the spread of coronavirus (Trade Arabia, 19-Mar-2020).
These restrictions do not include freight and domestic services. Mr Madbouly added all tourist facilities in the country will be sterilised and disinfected over the next two weeks.
4. Europe:
Multiple mid tier carriers suspend and drastically cut ops due to coronavirus outbreak
5. North America:
Delta Air Lines to reduce system wide capacity by 70%, introduce stricter cost savings
- Defer nearly all capital spending, including all new aircraft deliveries;
- Secure more than USD4 billion in cash savings for 2Q2020;
- Introduce 50% pay cut for all officers until 30-Jun-2020, with directors and MDs to take a 25% pay cut;
- Waiver compensation for board of directors for next six months;
- Temporarily consolidate airport facilities in Atlanta and other locations;
- Close majority of Delta Sky Clubs;
- Reduce active fleet by parking more than 600 aircraft, at least half of Delta's fleet;
- Accelerate retirements of older aircraft, such as MD-88s, MD-90s and some Boeing 767s;
- Reduce maintenance spend that is not necessary for safety;
- Reduce most contract spend. [more - original PR]
6. Latin America:
Fitch Ratings: Most Latin American airlines should manage coronavirus in the short term
Fitch Ratings reported (12-Mar-2020) most Latin American airlines should be able to manage the coronavirus outbreak "over the short term", but the scope of the effects from the virus is unclear and could lead to negative rating actions.
Rating headroom is "limited" for LATAM Airlines Group and Azul while GOL Linhas Aereas Inteligentes and Avianca have relatively more headroom. Currency depreciation could affect cash flow and liquidity. Fitch is monitoring issuer strategies to mitigate risk and implications for financial flexibility and access to credit lines. [more - original PR]
7. Africa:
UK Govt: Six African countries restrict border entry due to spread of coronavirus
UK's Government issued (15/17/18-Mar-2020) the following foreign travel advice, occurring as a result of the continued spread of coronavirus:
- Angola: To suspend all international services from 20-Mar-2020 until further notice;
- Mauritania: To suspend services to all other countries on 17-Mar-2020;
- Mali: To suspend all commercial services from affected countries from 19-Mar-2020;
- Cameroon: To close all land, sea and air borders from 18-Mar-2020;
- Ghana: Open only to citizens and permanent residents from 17-Mar-2020;
- Rwanda: To suspend all service to/from Kigali International Airport from 20-Mar-2020 for an initial period of 30 days. [more - original PR] [more - original PR - II] [more - original P - III] [more - original PR - IV] [more - original PR - V] [more - original PR - VI]
Additional Analysis (please click on the headings to go to the full story)
COVID19: US budget airlines and LCCs feel the heat
Like their larger counterparts, low cost and budget operators in the US are working to fortify their balance sheets, slashing capex and cutting their capacity as COVID-19 dries up demand for air travel in the short term.
Alaska, Southwest, JetBlue and Spirit are cutting their capacity growth to varying degrees, and Alaska and Southwest are taking steps to borrow funds to withstand the crisis - the duration of which is anyone's guess.
As bookings continue to turn negative and cancellations continuing to spike, US operators are no doubt ratcheting up their messaging that a proposed financial aid packaging totalling more than USD50 billion needs to materialise sooner rather than later.
In a statement to the stock market on 16-Mar-2020 easyJet neatly summarised the current, unprecedented, challenge facing European Airlines:
"European aviation faces a precarious future and there is no guarantee that the European airlines, along with all the benefits it brings for people, the economy and business, will survive what could be a long-term travel freeze and the risks of a slow recovery. Whether it does or not will depend significantly on European airlines maintaining access to liquidity, including that enabled by governments across Europe."
A number of European governments have indicated that they are prepared to support the airline industry in the light of the COVID-19 pandemic and the consequent near total collapse of demand resulting from travel restrictions.
This report presents CAPA's analysis of the liquidity balances of leading European airline groups, with Wizz Air and Ryanair leading and Norwegian trailing.
It also gives a review of recent actions taken to cut capacity and expenditure by those groups. It comes with the caveat that, as with the spread of the virus, the situation is changing rapidly and its content may be quickly superseded.
The coronavirus is a fact of life now. Its ramifications are immense, but it will diminish - and then pass.
While we adjust to this new and changing world, it's important to try to see through the fog to what might be the next phase. These are early days, but by tracking developments from now on, we hopefully can perceive trends that point to a more stable environment.
In the first of a new weekly CAPA Membership series, we look in depth at forward or leading indicators of future demand. The aim is to provide insight into signs of stabilisation through the COVID-19 crisis in aviation/travel markets worldwide.
We begin our series with an outlook for China. The world's second biggest aviation market, China, was first into this crisis, so we ask: are there signs of stabilisation there? And if so, could this provide a guide to other markets that are now in free fall?
This report is prepared with thanks to our partners, CAPA Membership, OAG, ForwardKeys, PredictHQ and Skyscanner.
COVID-19 prompts Azul Airlines to slash international capacity
Despite the coronavirus being less intense in Latin America, long haul international demand from the region is coming under pressure. The drop-off in demand, coupled with currency pressure, has forced the Brazilian airline Azul to slash its international capacity.
Perhaps fortunately for Azul, the majority of its capacity is deployed into Brazil's domestic market, but the airline is still making adjustments on domestic routes, pledging to match its capacity in line with demand.
As airlines worldwide work to shore up their liquidity and halt nonessential spending, Azul is touting its ability to weather the fallout from the spread of COVID-19 coronavirus, including no significant debt payments that are due in 2020.
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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