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COVID-19: Global cases to reach one million in two days: CAPA update 1-Apr-2020

Analysis

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:

- African airlines respond to growing number of cases;

- European Commission approves French airline tax deferral scheme;

- Kenya Airways seeking financial support from Kenyan Government.

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

- At the current rate of increase global coronavirus cases could reach one million in two days;

- The UK's recent spike in cases but its growth above Italy

Aviation & Travel Industry coronavirus news updates

Air Capacity Update: African airlines respond to growing number of cases 

In comparison to other continents around the world, Africa has seen minimal cases of COVID-19 being diagnosed, until recently. As more and more countries within Africa start to report growth in infection rates, governments and airlines have begun closing borders and cutting capacity.

The warning from the rest of the world seems to have received and capacity in the region dropped by more than 60%. 

Africa airline seat capacity: w/c 30-Mar-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: Airlines could burn through USD61bn in cash in 2Q2020, facing USD39bn in losses

IATA published (31-Mar-2020) new analysis showing airlines may burn through USD61 billion in cash reserves during 2Q2020, while posting a 2Q2020 net loss of USD39 billion.This analysis is based on the IATA's earlier Mar-2020 COVID-19 impact assessment, under a scenario in which severe travel restrictions last for three months. In this scenario, full-year demand falls by 38% year-on-year and full- year passenger revenues drop by USD252 billion. The fall in demand would be the deepest 2Q2020, with a 71% drop. The impact will be severe, driven by the following factors:
  • Revenues are expected to fall by 68%. This is less than the expected 71% fall in demand due to the continuation of cargo operations, albeit at reduced levels of activity;
  • Variable costs are expected to drop sharply (around 70% in 2Q2020) largely in line with the reduction of an expected 65% cut in 2Q2020 capacity. The price of jet fuel has also fallen sharply, although we estimate that fuel hedging will limit the benefit to a 31% decline;
  • Fixed and semi-fixed costs amount to nearly half an airline's cost. IATA expects semi-fixed costs (including crew costs) to be reduced by a third. Airlines are cutting what they can, while trying to preserve their workforce and businesses for the future recovery. [more - original PR]

2. Asia

China: Air China expects inevitable short term loss due to coronavirus pandemic

Air China stated (31-Mar-2020) it expects a "sharp short term decline" in domestic and international passengers in 2020 due to the coronavirus pandemic, adding that a "loss may be incurred inevitably in the short term". [more - original PR - English/Chinese]

South Korea: Korean Air to place foreign pilots on three months unpaid leave

Korean Air plans to place all non-Korean pilots on three months unpaid leave from Apr-2020 (Yonhap News Agency, 31-Mar-2020). Korean Air stated the measure is aimed at adjusting its workforce following a sharp reduction in operations and tighter entry restrictions globally as a result of the outbreak of coronavirus.

Australia/New Zealand: Virgin Australia requests USD850m from Australia's Government

Virgin Australia reported (31-Mar-2020) it continues to explore a range of options to manage the coronavirus crisis, including requesting financial support from the Australian Government in the order of AUD1.4 billion (USD856 million), as part of a broader industry support package to prepare for the crisis.
 
The proposal is preliminary and remains subject to approval by the Virgin Australia Holdings Board and the Australian Government. The funding request may or may not include conversion to equity in certain circumstances. [more - original PR]

3. Middle East:

Hamad International Airport CCO: Qatar Airways operations drop 75% 

Doha Hamad International Airport CCO Badr Mohammed Al Meer stated Qatar Airways operations have decreased by 75% as a result of the outbreak of coronavirus (Reuters, 01-Apr-2020). Mr Al Meer said 75% of the carrier's fleet has been grounded, which is likely to rise to 90%.

4. Europe:

European Commission approves French airline tax deferral scheme

European Commission approved (31-Mar-2020) a French scheme deferring the payment of certain aeronautical taxes by airlines, ruling it in line with EU state aid laws. The scheme aims to compensate airlines for part of the damage suffered due to the coronavirus outbreak by temporarily reducing the pressure on cash flows.
 
The scheme will be accessible to airlines with an AOC in France. It will offer them the possibility to defer the payment of certain taxes that would in principle be due between Mar-2020 and Dec-2020 to after 01-Jan-2021 and to pay the taxes over a period of up to 24 months. [more - original PR]

5. North America:

US Treasury releases guidance on payroll support, loans for airlines

US Department of the Treasury released (30-Mar-2020) guidance on payroll support to air carriers and procedures and requirements for loans to air carriers under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
 
In order to be eligible for payroll support, the applicant must agree to use payments exclusively to continue employee wages, salaries and benefits, refrain from involuntary layoffs/furloughs or reduced pay rates and benefits until 30-Sep-2020, and ensure that no dividends are paid, capital distributions made or equity security listed on the national securities exchange until 30-Sep-2021. Once deemed eligible, carriers will receive payroll support equal to the salaries and benefits it reported or is certified as having paid during the period from 01-Apr-2019 to 30-Sep-2019.
 
For loans, it is specified the Treasury may not issue loans to a borrower with securities that are traded on a national securities exchange unless the Treasury receives a warrant or equity interest, or to any other borrower unless the Treasury receives a warrant, equity interest or senior debt instrument. [more - original PR]

6. Latin America:

Volaris CEO: 'We are entering the coronavirus tunnel'

Volaris CEO Enrique Beltranena commented on the impact of the COVID-19 pandemic, stating: "We're entering the coronavirus tunnel" (CNN Espanol, 30-Mar-2020).

7. Africa

Kenya Airways seeking financial support from Kenyan Government

Kenya Airways chairman Michael Joseph reported the airline requested financial support from Kenya's Government "to support the airline through this period for critical operational costs like salaries" (Reuters, 31-Mar-2020).

The airline has placed most of its personnel on leave following the suspension of all international and a significant number of domestic services.

The above is a selection of more than 150 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)

COVID-19: Island nations' serious loss of air services. Part 1

When the General Manager of Atlanta Hartsfield-Jackson International Airport, the world’s busiest, reports an 85% year-on-year decline in passengers since the coronavirus outbreak, says revenue could be down by 50% or more, and that the airport normally services 26,000 flights per day but it has decreased to 1200, and "those flights are mostly empty"– you know that the aviation industry has a big problem.

But at the other end of the scale from Atlanta, in the world’s small island states, particularly remote ones, for which air travel is an absolute necessity, it is much more of a problem.

Broadly 25% of all independent nations are island countries.

This report looks at a selection of those states and airports, and at how they have been impacted by the COVID-19 outbreak.

COVID-19: US airlines evaluate pros and cons of government aid

As demand for air travel continues to hit nearly zero and estimates for a recovery continue to move the right, US airlines are quickly evaluating how to utilise a package offered by the country’s government designed to keep their workers employed. And, if airlines agree, how to make use of loans with strings attached that could ultimately be deemed unattractive, including the result that the government potentially takes stakes in airlines. 

The industry’s participation in the government’s support package remains tough to predict. It is a safe assumption that most airlines have no desire for the government to have a direct say in how they run their respective businesses, especially when the new normal of post-COVID-19 settles in. 

As COVID-19 coronavirus continues to wreak havoc on the global aviation and travel industries, Canada’s airlines are joining their counterparts worldwide in significantly pulling down their operations.  

Passenger operations at the company’s largest airline, Air Canada, are essentially coming to a standstill, and other Canadian airlines have also been forced to cut the bulk of their operations.

As is the case in other regions around the world, it is unpredictable how the Canadian aviation industry will have changed once the COVID-19 crisis is over, but it is likely that not all current operators will survive. 

COVID-19: SIA Group the big winner in Asia-Pac airline bailouts

With aviation and travel featuring very high on its government agenda, Singapore Airlines now looks well positioned to emerge from the coronavirus crisis as an industry leader. Other governments across the Asia Pacific region are taking steps to support the airline industry during the COVID-19 crisis, but in most cases the steps taken to date are timid and, so far, inadequate.

Some governments moved early to introduce packages based on waivers of fees and charges, and state-backed loans for airlines have also been offered. A handfulare following up these efforts with more direct forms of financial aid for carriers, with more being likely to follow.

Such steps can risk distorting the market, and generally it is not ideal for governments to be picking winners and losers in such a globally connected industry.

But the playbook has been thrown out of the window due to the sheer scale of the industry shock. Governments with the greatest appetite – and capability – to support their airlines could be a major factor in determining which carriers are in the strongest position when the pandemic eases.

Sometimes a blunt instrument is the best weapon available - regardless of the effect on the long term market profile.

Latin America’s largest aviation market, Brazil, is opting not to follow the lead of some governments in the region in completely shutting off their domestic air operations.

Instead, Brazil is offering a bare minimum of domestic service, and has emerged as one of the few governments in Latin America offering some sort of direct assistance to airlines. 

Even as Brazil’s domestic airspace remains open the capacity cuts by the nation’s airlines are stark, with Azul and GOL cutting their supply by 90% or more.

There is no way to predict accurately when the global aviation industry will return to normal, but Azul is holding a positive view that it could possibly be close to a full schedule in Jul-2020, in a current scenario where COVID-19 is a challenge for two to three months. 

There have been some dire predictions about the survivability of Latin Airlines after the COVID-19 crisis is over, but at this point in time Brazil’s major airlines seem reasonably well positioned to endure the fallout from the pandemic. However, that could quickly change, given the extremely fluid situation caused by the virus’ spread. 

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

At the current rate of increase global cases could reach one million in two days

202 countries are now affected

More than 75,000 diagnosed in 24 hours, the largest single day of new cases:

Cases by day (1-Apr-2020)

Confirmed COVID-19 cases by day, excluding China (1-Apr-2020)

USA once again posts the largest daily increase ever:


Top ten locations for COVID-19 (1-Apr-2020)

Top ten highest increases in infections by location (1-Apr-2020)

Global cumulative cases (1-Apr-2020)

Global mortality rate (blue line) vs. key locations mortality rate (1-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.

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.

The UK's recent spike in cases but its growth above Italy

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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