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COVID-19: US airline capacity decreases only slowly: CAPA update 30-Mar-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:

- American Airlines now to cut domestic, international capacity drastically in Apr/May-2020, but perhaps after reducing too slowly;

- UNWTO: International tourism arrivals to be down 20% to 30% in 2020;

- SIA Group the big winner in Asia-Pac airline bailouts

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

- Confirmed global COVID-19 cases tops 700,000

- Within 72 hours the USA has added more than 60,000 cases

Aviation & Travel Industry coronavirus news updates

Air Capacity Update: Has enough US domestic capacity been cut to stop the spread of COVID-19? 

U.S. airlines have been late to cut capacity on domestic routes, with major announcements really only coming through today (American Airlines drastically to cut domestic, international capacity in Apr/May-2020).

Outside the extensive domestic route suspensions United and Delta announced, all other airlines were instead keeping their schedules intact but at the same time increasing the amount of same-day flight cancellations, sometimes in excess of 40%.

Domestic capacity in the US represents roughly a 30% decrease, however as the country now has the largest number of cases globally and further announcements imminent, further decreases are expected. 

United States domestic 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

UNWTO: International tourism arrivals forecast to be down 20% to 30% in 2020

UN World Tourism Organization (UNWTO) released (26-Mar-2020) its updated assessment of the likely impact of the coronavirus on international tourism, estimating international tourist arrivals will be down by 20% to 30% year-on-year, based on developments in the global community.
UNWTO reported a 20% to 30% decline in tourism may correlate into a decline in international tourism receipts of between USD300 billion to USD450 billion and between five and seven years' worth of growth will be lost to coronavirus. UNWTO notes that in 2009, after the global economic crisis, international tourist arrivals declined by 4%, while the SARS outbreak led to a decline of just 0.4% in 2003. [more - original PR]

2. Asia

China: Air China outlines international network until early May-2020

Air China, via its official WeChat account, announced (28-Mar-2020) its international network from 29-Mar-2020 until 30-Apr-2020 as follows: 

  • Beijing departure:
    • Beijing Capital-Los Angeles: Weekly;
    • Beijing Capital-Vancouver: Weekly;
    • Beijing Capital-Paris CDG: Weekly;
    • Beijing Capital-Copenhagen: Weekly;
    • Beijing Capital-Warsaw: Weekly from 17-Apr-2020;
    • Beijing Capital-Minsk: Weekly;
    • Beijing Capital-Stockholm: Weekly;
    • Beijing Capital-Moscow: Weekly;
    • Beijing Capital-Vienna: Weekly from 14-Apr-2020;
    • Beijing Capital-Athens: Weekly;
    • Beijing Capital-Delhi: Weekly from 20-Apr-2020;
    • Beijing Capital-Phnom Penh: Weekly;
    • Beijing Capital-Yangon: Weekly;
    • Beijing Capital-Islamabad-Karachi: Weekly from 17-Apr-2020;
    • Beijing Capital-Dubai: Weekly from 16-Apr-2020;
    • Beijing Capital-Seoul Incheon: Weekly;
  • Shanghai departure:
    • Shanghai Pudong-Frankfurt: Weekly;
    • Shanghai Pudong-London Heathrow: Weekly;
    • Shanghai Pudong-Bangkok: Weekly;
    • Shanghai Pudong-Tokyo Narita: Weekly;
  • Chengdu departure:
    • Chengdu-Kathmandu: Weekly.

Malaysia's MAVCOM revises traffic forecast to reduce by 36% to 38% in 2020

Malaysian Aviation Commission (MAVCOM) revised (27-Mar-2020) its forecast for Malaysia's 2020 traffic from growth of between 4.6% and 5.7% to a contraction of between 36.2% and 38.1% year-on-year. This translates to between 67.7 million and 69.7 million passengers in 2020, a "considerable" decrease from 2019's high of 109.2 million passengers. MAVCOM outlined the following reasons for the expected decline:

  • The revised forecast takes into account cancellations by Malaysian and foreign carriers totalling 14 million seats for the period Jan-2020 to Dec-2020, in addition to further seat reductions of 15% for domestic routes and 20% for international routes;
  • Malaysian carriers cancelled 7.3 million seats as of 26-Mar-2020, representing 8.6% of total seat capacity in 2020;
  • Foreign carriers operating to and from Malaysia reduced seat capacity by 6.7 million, 24.5% of the total seat capacity for foreign carriers in 2020;

MAVCOM will continue to monitor industry developments and look to make adjustments to its forecasts accordingly. [more - original PR] [more - original PR - II] [more - original PR - III]

Australia/New Zealand: Australian Government launches 'Regional Air Network Assistance Package'

Australia's Deputy Prime Minister and Minister for Infrastructure, Transport and Regional Development Michael McCormack announced (28-Mar-2020) the government will provide an AUD198 million (USD121.4 million) 'Regional Air Network Assistance Package' to help maintain Australia's regional air network.
 
Mr McCormack stated: "This package guarantees core routes for domestic air freight will remain open and essential workers remain employed, while providing vital financial support for airlines servicing regional and remote locations".
 
An additional AUD100 million (USD61.3 million) is available to provide direct financial support to smaller regional airlines during the downturn in aviation activity, should it be needed. Airlines, contracted aero-medical providers and other essential service providers can apply for consideration and, subject to financial analysis, be eligible for assistance on a month-by-month basis through to 30-Sep-2020. [more - original PR]

3. Middle East:

Saudi Arabia extends suspension of international and domestic services

Saudi Arabia's Ministry of Interior extended the suspension of all international and domestic passenger services until further notice, as a precautionary measure against the spread of coronavirus (Saudi Press Agency, 29-Mar-2020).

4. Europe:

John Menzies dismisses around 17,500 staff, more than half of global workforce

John Menzies dismissed (27-Mar-2020) over half of its global workforce, around 17,500 people at 200 airports, in response to the coronavirus outbreak.
The company reported volumes have dropped by around 20% in the past two weeks due to service suspensions, adding it hopes to hire back staff when the outbreak is contained. John Menzies employs workers in fuelling, ground handling, lounge services and maintenance sectors. [more - original PR]

5. North America:

American Airlines to cut domestic , international capacity drastically in Apr/May-2020

American Airlines announced (27-Mar-2020) it will reduce international capacity by 80% to 90% year-on-year in both Apr-2020 and May-2020, due to significantly decreased passenger demand and travel restrictions. Additionally, domestic capacity will be cut by 60% to 70% in Apr-2020 and 70% to 80% in May-2020.
Service to Kona, Lihue and Maui is suspended in Apr-2020, however daily Los Angeles-Honolulu service will continue. [more - original PR]

6. Latin America:

IATA: Brazil aviation industry revenues to plummet by 40% in 2020

IATA estimated the aviation sector in Brazil will have a 40% year-on-year reduction in revenues in 2020 due to the COVID-19 (America Economia, 27-Mar-2020). IATA also estimates that 61,500 personnel will be retrenched.

7. Africa

Ghanaian airlines receive six month reprieve on repayments to banks

Ghana's President Nana Akufo-Addo announced (28-Mar-2020) Ghanaian banks will grant a six month moratorium on principal repayments by companies in the airline and hospitality industries, effective 01-Apr-2020, as part of measures to mitigate the impact of the coronavirus pandemic.

Commercial and private aircraft movements in Ghana are restricted, with the exception of cargo operations and essential services. [more - original PR]

The above is a selection of more than 150 news updates 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)

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. 

In projecting likely outcomes as the COVID-19 coronavirus disrupts all previous predictions, CAPA has turned to our data partners,some of the best forward indicator data sources in aviation:

- OAG, schedules
- 3VIctors, travel searches
- ForwardKeys, forward bookings
- PredictHQ, conferences and events.

At this stage in the rollout of the worst threat to the industry in modern aviation, many of the indicators are predictable, airline seats are being grounded, travel searches are confounded by the absence of real travel options, with a similar impact on forward bookings; conferences and events equally are almost uniformly being cancelled or postponed.

But, as can be seen below there are some very modest indications of hope for the coming months - which we shall track as they mature into a real recovery. When those forward looking results start to offer guidance to future actions, their full value will emerge.

For now, as PredictHQ suggests below, "the good news for airlines is that the vast majority of the events have been postponed", rather than being cancelled, so once the revised dates start to firm up, the outlook brightens considerably. The effects on the airline industry will then be indicated by 3Victors and ForwardKeys as the news translates into buyer activity.

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

Mortality rate continues to grow, to 34,000, representing almost 5% of cases

199 countries are now affected

Confirmed global COVID-19 cases tops 700,000:
Cases by day (30-Mar-2020)

Confirmed COVID-19 cases by day, excluding China (30-Mar-2020)

Within 72 hours the USA has added more than 60,000 cases:
Top ten locations for COVID-19 (30-Mar-2020)

Can the US slow the increase of cases? The numbers say no

Top ten highest increases in infections by location (30-Mar-2020)

Global cumulative cases (30-Mar-2020)

Despite massive increases in confirmed cases, the US mortality rate is below global average

Global mortality rate (yellow line) vs. key locations mortality rate (30-Mar-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.

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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