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COVID-19: US cases overtake China and Italy: CAPA update 27-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.

Top news headlines:

- US records a higher single day increase in cases than any other country ever;

- Despite the increase in cases, the US has five of the top 10 busiest airlines

- China: CAAC restricts airline international passenger capacity;

- IATA renews calls for European govt to take 'urgent action' to support airlines during COVID-19.

Aviation & Travel Industry coronavirus news updates

Air Capacity Update: Despite the increase in coronavirus cases, the US has five of top 10 busiest airlines

Airlines ranked by seat capacity: w/c 23-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

ICAO welcomes G20 calls for global response to COVID-19

ICAO Council president Salvatore Sciacchitano and ICAO secretary general Dr Fang Liu welcomed (26-Mar-2020) the G20 leaders' statement on COVID-19, including its underscoring of how this unprecedented pandemic serves as "a powerful reminder of our inter-connectedness and vulnerabilities".
Mr Sciacchitano said: "From the standpoints of travel and trade, global inter-connectedness relies significantly on the unmatched speed and reliability of international civil aviation" and he was "encouraged to see the strong financial commitments the G20 has now established to aid in the global recovery from COVID-19, and that the sectors most gravely impacted by current pandemic mitigation measures will be prioritised going forward". [more - original PR]

2. Asia

China: CAAC restricts airline international passenger capacity

CAAC announced (26-Mar-2020) that China's airlines will be permitted to operate one weekly passenger frequency to one city per country, operating at no more than 75% capacity, effective 29-Mar-2020. Foreign airlines will be limited to one weekly service to China, at 75% capacity.

The new measure will reduce the number of inbound arrivals by air from 25,000 per day to 5000. The measure is aimed at "resolutely contain the increasing risks of imported COVID-19 cases, and in accordance with the requirements of the State Council for joint prevention and control of the pandemic". [more - original PR - Chinese]

AirAsia Group to ground most of its fleet, suspend services network wide

AirAsia Group announced (26-Mar-2020) plans to temporarily ground most of its fleet across the whole network in response to the coronavirus outbreak. It also reported the following suspensions:

  • AirAsia Malaysia: All services suspended from 28-Mar-2020 to 21-Apr-2020;
  • Philippines AirAsia: All services suspended from 20-Mar-2020 to 14-Apr-2020;
  • Thai AirAsia: International services suspended from 22-Mar-2020 to 25-Apr-2020, domestic routes will continue on a reduced basis;
  • Indonesia AirAsia: International and domestic services continue at reduced frequency;
  • AirAsia India: Suspension of all services from 25-Mar-2020 for 21 days, adhering to government directives;
  • AirAsia X: Suspension of most services from 28-Mar-2020 to 31-May-2020;
  • Thai AirAsia X: Suspension of all services from 16-Mar-2020 to 16-Jun-2020.

The group added it will evaluate the situation closely and is prepared to reinstate services "as soon as the situation improves, subject to the necessary regulatory approvals". [more - original PR]

Australia/New Zealand: Rex granted authorisation to coordinate with QantasLink and Virgin Australia

Regional Express (Rex) announced (26-Mar-2020) it was granted interim authorisation from the Australian Competition and Consumer Commission (ACCC) on 26-Mar-2020 to coordinate with QantasLink and Virgin Australia on 10 regional routes where Rex competes with QantasLink and/or Virgin Australia:

  • Sydney-Wagga Wagga, Albury, Armidale and Dubbo;
  • Melbourne-Mildura;
  • Adelaide-Port Lincoln, Whyalla and Kangaroo Island;
  • Townsville-Mount Isa and Cairns.

Rex will enter discussions with QantasLink on how to best service regional communities if there are meaningful assistance packages provided by Australia's Federal, State and Local Governments.

Rex deputy chairman John Sharp reported governments "all need to act urgently and decisively to determine specific assistance packages so that the airlines can at least provide the bare minimum of essential air services to keep the communities running… Eight other regional airlines have given a 24 hour ultimatum to the Federal Government saying they have only days before they collapse". [more - original PR] [more - original PR - II] [more - original PR - III]

3. Middle East:

AACO outlines measures Arab governments could adopt to ease burdens on airlines

Arab Air Carriers' Organization (AACO) reported (19-Mar-2020) it has communicated with the Arab governments through the Arab Civil Aviation Organization encouraging them to adopt the following measures to support the industry during the COVID-19 pandemic:

  • Taxes: AACO encouraged Arab governments to provide tax relief to airlines for at least a period of two years;
  • Financial situation of airlines: AACO urged Arab governments to provide speedy financial support packages for airlines;
  • Paying lenders and suppliers: AACO sought the support of Arab governments and other partners in aviation as well as other stakeholders to request lenders and suppliers to provide a grace period to airlines and refrain from any measures against them in the current situation, until air transport is back to the start of normalcy;
  • User charges: AACO encouraged governments to support airlines in requesting airport operators and air navigation service providers to exempt airlines from paying parking fees during this time of emergency and to cancel or reduce other user charges paid by airlines;
  • Liabilities under passenger rights regulations: AACO requested governments temporarily exempt airlines from passenger rights regulations as the current situation is considered to be force majeure that obliges airlines to cancel or delay their flights with short notice;
  • Slots regulations: AACO asked the support of governments to exempt airlines from any slot rules applied in Arab airports;
  • New costs related to containing the spread of the virus: Many airlines have introduced sanitisation measures and health monitoring devices. AACO requested governments to either compensate the airlines for the cost they are incurring under this category or to provide the tools needed for sanitisation and monitoring. [more - original PR]

4. Europe:

IATA renews calls for European governments to take 'urgent action' to support airlines during COVID-19

IATA renewed (26-Mar-2020) calls for "urgent action" from European governments to provide financial support to airlines in response to the coronavirus (COVID-19) outbreak.

According to IATA's current estimates, European carriers are expected to lose USD76 billion in revenue in 2020 due to the virus, with passenger demand projected to decline 46% year-on-year. IATA warned such a decline puts at risk about 5.6 million jobs and USD378 billion in GDP supported by air transport. IATA detailed some of the impacts at the national level as follows:

  • UK: 113.5 million fewer passengers resulting in a USD21.7 billion revenue loss, risking almost 402,000 jobs and around USD32.7 billion in contribution to the UK economy;
  • Spain: 93.7 million fewer passengers resulting in a USD13 billion revenue loss, risking 750,000 jobs and USD49.4 billion in contribution to Spain's economy;
  • Germany: 84.4 million fewer passengers resulting in a USD15bn revenue loss, risking 400,000 jobs and USD28 billion in GDP;
  • Italy: 67.7 million less passengers resulting in a USD9.5 billion airline revenue loss, risking 256,000 jobs and USD67.4 billion in contribution to GDP;
  • France: 65 million fewer passengers resulting in a USD12 billion revenue loss, risking 318,000 jobs and USD28.5 billion in contribution to France's economy. [more - original PR]

5. North America:

Spirit Airlines to cut capacity by 45% in Apr-2020

Spirit Airlines announced (26-Mar-2020) it will reduce capacity by approximately 45% in Apr-2020 and 75% in May-2020, as a result of reduced travel demand and government restrictions. Measures are being taken to reduce costs, including the following:

  • Company wide freezing hire, with the exception of essential front line and management roles;
  • Suspension of USD50 million to USD75 million in planned non aircraft capex;
  • Additional financing secured through unencumbered assets;
  • Reduction of non fuel operation costs by USD20 million to USD30 million, excluding savings made by reduced capacity;
  • Discussions with significant stakeholders and vendors regarding contract adjustments or financial support;
  • Reduction of CEO and president base salary by 30%;
  • Reduction of compensation for all SVPs, EVPs and board of directors members. [more - original PR]

6. Latin America:

Embraer implements contingency plans as coronavirus situation unfolds

Embraer reported (26-Mar-2020) its crisis committee is monitoring the development of the coronavirus pandemic on a daily basis and it has implemented contingency plans to act as quickly as necessary as the current situation continues to unfold.

At the company's premises in Brazil, some essential activities continue to operate on a regular basis, some employees are working from home and those employees who cannot perform their activities remotely have been placed on temporary paid leave until 31-Mar-2020. [more - original PR]

7. Africa

Air Seychelles to suspend all regional services, reduce domestic schedule to one service

Air Seychelles announced (26-Mar-2020) the suspension of of all regional services until 18-Apr-2020, due to the outbreak of coronavirus. The carrier is also reducing its domestic schedule to only daily Mahe-Praslin service from 26-Mar-2020. [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)

The Purchasing Managers' Index, published by IHS Markit and a widely used indicator of business confidence, has hit record lows in Mar-2020. The indices being historically a reliable lead indicator of air traffic growth their collapse, both for the Eurozone and the UK, is yet another sign of the massive impact of COVID-19 on European aviation.

Meanwhile, IATA has more than doubled its estimate of the negative impact of coronavirus on world airline passenger revenue in 2020 - from USD113 billion to USD252 billion (30% of previously forecast total revenue).

This impact is expected to be felt most by airlines in Asia Pacific and Europe, while Europe is likely to suffer the greatest percentage RPK fall. Airlines eliminate variable costs by grounding aircraft, and they are doing what they can to reduce labour expenses - the biggest fixed cost.

Nevertheless, a loss for the world airline industry in 2020 now looks inevitable.

The typical European airline's liquidity was two months of revenue at the outset (similar to those in other regions).

There are some stronger airlines, but even after mitigating action on costs, survival for most in a zero demand environment is a matter of months.

The predictions for plummeting revenue for global airlines triggered by the rapid spread of COVID-19 continue to intensify, and no region of the globe will escape the devastation.

IATA's latest data show that Latin America will experience one of the starkest declines in traffic for 2020, second only to Europe's. Many airlines in the region have ceased their operations completely as countries in Latin America close their borders in order to combat the spread of COVID-19.

Airlines in Latin America are navigating the COVID-19 crisis with varying degrees of strength.

One of the region's largest operators and Colombia's flag airline, Avianca, is in a unique situation, having just completed a major restructuring of its debt and aircraft order book. However, the airline remains one of the most highly leveraged in Latin America, which could create challenges for Avianca as it works to sustain and increase its liquidity during the COVID-19 pandemic.

Avianca has now ceased all commercial passenger operations, and the revenue hit from the grounding will be intense. At this point, governments in Latin America have been slow to offer support to airlines during the crisis, and the region's major airline association is warning that some operators could have a short window for survivability without government aid.

COVID-19: Bailouts for Airport investors? Only China plans expansion

Much is made of the disastrous impact of the current COVID-19 coronavirus pandemic on the airline sector, but airports are suffering too, of course, and those organisations which invest in airports must reappraise their strategies. The remorseless progress of the coronavirus globally is threatening the world's air transport and tourism industries in 2020 and beyond.

A company does not easily come back from disasters of this order, even if the mechanics and infrastructure of the industry remain in place.

In most countries the majority of airports are still state-owned (central, regional or local government); in others, the private sector runs the show. Those private sector investors entered the business because it was perceived as a safe haven for pension funds, for example, with perhaps relatively low returns but proven longevity.

Now, the airports, like the airlines, will hit severe cash flow problems quickly, if they have not already. While some airport development projects will continue because too much time and energy has already been invested to do otherwise, others will inevitably be delayed and possibly for years, rather than months. That is hardly an enticing prospect to a potential investor.

For some, perhaps many, airport investment is not going to look like the long term cash cow it was up until January of 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.

Coronavirus Situation Report

US cases set to overtake China and Italy; the latest Novel Coronavirus Global Situation

Note: Since the WHO report of 27-Mar-2020, the US has in fact overtaken all other countries. See below

199 countries are now affected

Confirmed global COVID-19 cases tops 520,000:
Cases by day (27-Mar-2020)

More than 520,000 cases have been confirmed across the globe, an increase of approximately 15% in 24 hours.

Confirmed COVID-19 cases by day, excluding China (27-Mar-2020)

USA's 25% increase puts it days away from overtaking China and Italy:
Top ten locations for COVID-19 (27-Mar-2020)

Note: According to the Wall Street Journal, there are 82,404 confirmed infections across America, based on data compiled by Johns Hopkins University

US records the highest single day increase than any other country ever

Top ten highest increases in infections by location (27-Mar-2020)

Global cumulative cases top 520,000 (27-Mar-2020)

Italy mortality rate now consistently above 10%

Global mortality rate (yellow line) vs. key locations mortality rate (26-Mar-2020)

Spread of virus 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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