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Recorded at CAPA Live May

Asia Aviation: Can travel bubbles provide the way forward?

The Asia-Pacific region was initially hit hard by the pandemic, probably more so than the other regions. But some of the key Asia-Pacific markets have also recovered more quickly than those in other parts of the world. While borders generally remain closed, or are subject to quarantine restrictions that have a similar effect on travel, there have been some so-called green lanes established for essential travel, but in general the hoped-for travel bubbles have been slow to develop.

Recent weeks have seen increased waves of the virus resurfacing in countries who had believed to have COVID-19 under control. This return however is not unexpected and has emphasised the need for practical, data-driven steps to opening up in a safe means. In this session we explore these methods and provide clear examples of required action. 

  • How are markets performing in Asia-Pacific? 
  • What practical, data-driven steps should each country take to opening up? 
  • Are governments investing enough in technology, processes, infrastructure?  
  • What impact is this having on hubs like Singapore? 
  • Are bilateral corridors effective in opening up markets? 

Moderator: CAPA - Centre for Aviation, Executive Chairman, Peter Harbison

Speakers:

  • AAPA, Director General, Subhas Menon
  • PATA, CEO, Mario Hardy

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Transcript

Crew:

I'll just hit record and [inaudible 00:00:00] myself and good luck. Okay.

Peter:

Hello. Welcome to CAPA Live, talking about the Asia Pacific region aviation and travel. Delighted to have with us again, Subhas Menon, who's the Director General of AAPA, that is the Association of Asia Pacific Airlines, and Mario Hardy, who's CEO of PATA, the Pacific Asia Travel Association. Gentlemen, great to see you again.

Mario Hardy:

Good morning, Peter.

Subhas Menon:

Good to see you Peter.

Peter:

If I could, let's kick off with a look at just what's happening country by country from a COVID point of view, because things have changed quite dramatically since we last spoke a couple of months ago. And I think the feeling was fairly much of optimism and well, the worst is past. It's probably not where we stand now. Mario, if I could start with you.

Mario Hardy:

Yeah, I agree with you. I think a few months ago were, some of us were maybe a bit more optimistic, but certainly in the last couple of weeks, for several countries around the region here, not so optimistic anymore. Certainly for Thailand, the restrictions are back on. Bangkok capital is actually on complete lockdown for the next two weeks at least, possibly more because the number of cases keep rising on a daily basis, number of death keeps rising too. Singapore just found a new cluster this morning and are putting restrictions again, bubbles between Singapore, Hong Kong on and off, on and off, on and off. And of course India, which is, really, really challenging times for them at the moment. And of course, many countries who are now actually stopping access to the Indian market, worrying that the variant might actually be entering their destination and create new cluster of cases and masses again. So not so optimistic at the moment.

Peter:

I think Korea too is undergoing a spike. Japan obviously is certain has been suffering recently too.

Mario Hardy:

Yes. Yeah. With Japan, with the Olympics coming up and initially with no international, domestic visitors only, but now actually it looks like, well, there won't be an audience at all. All will be online and even now questioning also the possibility of bringing the athletes because of the new clusters they found again this week, so.

Peter:

But meanwhile, China seems to be progressing fairly steadily.

Mario Hardy:

Oh, they're doing fantastically well. They just had the May Holiday and domestic tourism where the record numbers in terms of travel and spending, their economy is actually doing far better than the anticipated. So things are doing pretty well for them, but again, it's closed. So essentially this traveling domestically, can't travel out and you can't really travel to China either at the moment except on a few exception rules, but.

Peter:

Mm Hmm, right. Thanks. Yeah, definitely a very, very different story from where we were a couple of months ago. Subhas, from an airline perspective, how do your members see things at the moment? Are they, obviously, influenced by the change in fortunes from a COVID point of view, but they're also of course having to deal with the financial side of things, particularly carriers like Singapore and Cathay without the luxury of a domestic market. What are you hearing? I thought I saw the figures that we're down to sort of 20% to low 20% of last of 2019s capacity.

Subhas Menon:

Yeah. Well Peter, I think the only silver lining in the cloud is cargo, because the demand for cargo is just skyrocketed and because of a reduction in capacity, the use have also shot up. But as you know, cargo is not going to make a lot of difference when it comes to cash burn and losses. We just total down bound the cash burn from the airlines in 2020 came out at close to 40% of the total losses of the airline industry. So Asia Pacific airlines are doing worse than the airlines of other regions. And of course the level of restrictions in border closures is much higher in Asia than anywhere else. Of course, when we spoke last, there was an air of optimism, mainly because of vaccines, but the vaccine deployment, also the exception of Singapore, which is almost a thing what 25% of the population has already received two doses of the vaccine, whereas everywhere else it's below 10% even here in Australia.

So that is one of the reasons why I think the mood is a bit more despondent. In addition, there has been these new mutant variants that have been circulating, particularly coming out of India. And so many of the countries have slammed down their border restrictions even further. And it looks like those countries that are able to control the virus or eradicate the virus are in a better shape, but they are in no mood to reopen their borders. Meanwhile, I think the debt burden is also increasing for the airlines and the debt is about, I would say maybe five, six times the losses that they are incurring. So I think they will require a lot of help from the government in order to stay in the game.

Peter:

Yeah. So I wanted to ask you about that. I mean, most of the anticipations from a policy point of view from governments and airlines had been around this sort of optimistic, more optimistic outlook that we should be expecting right now, quite obviously with what's going on, it's going to be at least another three months before we can see some real rays of sunshine. Are you, I mean, you talk to governments, you talk to the airlines who are talking to their governments too, what sort of noises are we hearing from governments in terms of potentially additional support or not as the case may be.

Subhas Menon:

Well, actually just two, three weeks ago, things were looking a bit better than what they are today. And then last week we had the announcement of the Singapore-Hong Kong travel bubble, which is now should move to 26th of May. But just a few days later, we had a turn for the words and that's why Singapore is concerned with the cluster and Hong Kong has also closed down what they call residential apartment area. So now what they're saying is they're looking only we can't go any further until we get these things under control.

So for example, the Singapore Minister of Transport put it quite well. We just have to get out of there and look at things from a biological point of view because the other problem is that there is a multiplicity of restrictions, and it is not possible to get any kind of multilateral agreement on how to safely reopen borders. The only way you can do it is through bilateral discussions and travel bubbles, but travel bubbles are only going to take place between places where the virus is under control and the population has been in unite, so I think it is a step by step kind of approach and probably take about maybe another three months before we see some of these travel bubbles really take route, kick start and maybe we can shut down any sign of another surge.

Peter:

So that does mean, I mean, going on what you were saying before, too, about the levels of debt and cash burn. Sub has, there must be some serious discussion at a national level, at the individual national levels now about what are we going to do about our airlines? It's burning so much cash, are we going to have another cash infusion? Are we going to start changing the way we think about the airline industry even? I mean, it's getting to that stage, isn't it?

Subhas Menon:

Yes. I think it is getting to that stage. And it's, you've probably also seen in some of the airlines are also looking to private markets to increase their liquidity, but of course not everyone is successful in doing that. Secondly, they are having these very serious discussions with their lessors to reduce these costs. Also, making all kinds of different arrangements with the aircraft manufacturers in terms of taking back some of the aircraft or deferring new aircraft. And then on top of that, I think that they are still talking to the central banks and governments for increased liquidity.

Peter:

Yeah. I think, I mean, globally speaking too, because of the general level of debt, there's a growing, but still fairly muted voice about the likelihood of a much more active government involvement in airlines in the future because of this debt situation. Even down to the level of nationalization or renationalisation in one form or another, is that a discussion that you're having with the members?

Subhas Menon:

Yes. I think the members are all talking seriously with the government. At the moment, the governments have been quite forthcoming in their support and then they are hoping that this would carry on. I mean, the evidence of it is that after 14 or 15 months and the airlines are mostly all still around and they are still playing a major role in terms of transportation of essential supplies, vaccines. So I think the government see the value of airlines being around. And when the situation is over, I think it is very essential for the airlines to be around to help support tourism entry.

Peter:

Hmm, thanks. Yeah, so Mario I did want to talk about the prospect of bubbles, but I think we've probably, from what we were saying before too, we've probably gone back several steps in terms of the likelihood. Australia and New Zealand are pretty successful I'd dare say at the moment. I don't want to attempt to fight but that seems to be working quite well, that bubble. And but there again, there's been a total lack of cases locally caused anyway. What's your feeling about, I mean sorry, I remember last time when we talked, you were pretty pessimistic too, about opening up generally in Asia. What's your feeling with deadlines and so forth in terms of great opportunity to travel internationally?

Mario Hardy:

Yeah. I think the intents that we discussed last time is still there, and I think it will happen, but I don't think it's going to happen to the timeline that actually people expected. I think they were too ambitious with their goals. I mean, if I think of Thailand specifically, with their goals of opening by the 1st of July, when actually less than 1%, 0.001% of the population has been vaccinated, it's unrealistic. If you look at New Zealand and Australia, why it is so successful at the moment is because the number of cases in both destination is under control. It's minimal. And that to me is the key to opening a bubble.

If Hong Kong and Singapore manage to successfully reduce the number of cases to a much greater level and keep it under control, and it is, for people vaccinated and still testing and et cetera, yes it's possible. For other destinations around the region here where only a fraction of the population have been vaccinated, I think it's going to take a much longer period for them to reopen. I don't want to sound too pessimistic for the people in the industry, but I do believe that actually 2021 restart for most destination, and I'm not saying everybody, but for most destination will be a huge challenge. 2022 looks more promising to me.

Peter:

Let's just look at this issue about vaccinations. I mean, going around the region, there's always been...ever since the vaccinations were basically promoted as being successful. The fear has been that the developed countries would gobble up the great reserves and leave the developing countries very much in their wake. Is that what we're seeing now? And if it is what's being done about it to try and alleviate the situation?

Mario Hardy:

Well, I don't think for Asia we have seen this situation yet. Most countries in Asia, not all of them have acquired sufficient vaccines, but they have different pace of actually vaccinating people. That's the main issue we have here in Thailand. I spoke very publicly about this, and I'm sure certain ministers might not really pleased with it, but the fact that we need to accelerate. Thailand has vaccine, but it hasn't started to accelerate the process of vaccinating people yet. And that's the frustration that the industry has, because we know they have, and there's more in order. There's a lot more actually coming in, supposedly in July or August. And then if they haven't even started yet to vaccinate in masses, these vaccines will expire at some point.

So we're getting concerned with the rate of vaccination specifically are hitting the country. Other countries, they reason the same thing, most of them do have a pile of stock of vaccines. And it's a question of getting a process going. And I think there's great examples of countries around the world who have put their militaries and lots of other people in place to assist in accelerating that process. And that's what our hope is, is that countries start to realize that it's important to accelerate it so that we can start to reopen and tourism can restart at least gradually if not a reasonably first.

Peter:

Yeah. I think we're all discovering that there are a lot of logistical problems, issues that need to be resolved. Even in Australia where our health system is a very good one, we have a division between Commonwealth and the state. And we're finding that rolling out logistics is, rolling up vaccines is actually quite difficult, much, much slower than we had anticipated, even though we perhaps are a bit tainted by complacency as well. What, in terms of vaccines, I'm interested for example, that I know China will only recognize the Chinese vaccine for entry to China. What a massive market, obviously for Thailand, what vaccines are top of the list there?

Mario Hardy:

In Thailand actually it'd be representationalism, it actually was the first one approved. The Sinovac, the Chinese vaccine was also approved here. At the moment, those are the only two that are actually been approved in the country. However, I believe the process to approve Pfizer and Moderna are actually in place and it is anticipated that Pfizer will be available in either July or August in limited quantity, but there will be some coming into the country.

Peter:

Mm Hmm. So Sub has, when we talk about, when you talk about freight, obviously a lot of the freights are not in significant portion of that freight now coming into the region will be carrying vaccines in one form or another. How's the airline industry handling that?

Subhas Menon:

Well, I think, I was just reading a report. It said that in terms of delivery and satisfaction to the people who have ordered the vaccines for the last few months, it has been a hundred percent, there has been no failures in that respect, but I think the problem really is in terms of supply of the vaccines. I mean, I think different countries that pursued different strategies to control the spread of the virus in Asia Pacific, by and large, they have tried to control the spread of the virus by adopting public health policies. Whereas in the west, they have now gotten a hit of the curve by vaccinating their populations. So in a sense, I think they have to agree that the vaccines had to go where they are most needed. And India being the largest producer of vaccines, especially the AstraZeneca vaccine, doesn't have enough vaccines for their own population. So I think that the supplier has been sort of effected as a result of the demand patterns that is going on.

Peter:

Hmm. Given all this situation, the very low level of vaccinations, the steeply rising level of infections in quite a number of countries, and we haven't even talked about Indonesia, which is a bit of a blank spot at the moment, I think, but nonetheless, from what we've seen in India, quite a risk. I know Subhas, you have to tow the [inaudible 00:18:53] align, but isn't it premature now to be talking about really pushing governments to be reopening in this region? I mean, it really is a non-starter surely.

Subhas Menon:

Well, I think of course we have to keep asking governments to reconsider reopening the borders. But the reality of the situation is, I think the policy of tighter controls has been vindicated, because in the Asia Pacific region, by and large, they've been able to control the spread without too much impact on the public health facilities, with a few exceptions like India and the Philippines. Indonesia, as you see, we don't really have enough information to see how they are going, but by and large, most countries have been able to control the virus.

So I think it will be unrealistic of us to ask them once to reopen the borders immediately, that is one part of it. The second part of it, because many of the travel and health regulations that are in place today, confusing and conflicting, if they're going to reopen borders now, I think it will be a real mess for people to get through this process. So you also need to try some ways of coordinating and clarifying these different policies. And I think that is only possible to bilateral negotiations and travel bubbles, so that will take time to be put in place. So even if the travel bubble between Hong Kong and Singapore doesn't materialize now, I think the groundwork that they have done for this travel bubble to take off when the situation's right, we'll be moving in the right direction.

Mario Hardy:

If I could comment Peter, I agree with Subhas. I think at the moment, it's really difficult for organizations like ours to push governments to reopen under the current condition. However, I do support the idea that now is the time. Well, hey, why is the time still the time for them to get prepared, to put their protocols in place to ensure they have either vaccination passport certificates, whatever we may want to call it as a mechanism to recognize the people who have been vaccinated, who carry this little piece of paper, which hasn't been digitalized yet. And that will be a really challenging process. We were in a call yesterday with IATA, WTTC, and other organizations and talked about it. There's a billion people around the world who have been vaccinated. Most of them carry a piece of paper in their own language, which how do you digitize this? How we going to even start doing that at the moment? And if we don't act today, we're going to enter in a much greater problem, logistical problem later on. Yeah.

Subhas Menon:

I agree with Mario. I mean, we do have travel passes that are being promulgated, but there is no digital health certificates around, so how are these travel passes will be effective?

Peter:

Yeah. And I think it's no secret that it's pretty easy to counterfeit some of the paper travel passes too and that has occurred in a number of cases. Just taking one step back, I think, and maybe Sub has then Mario can pick up on this. One of the things I understand that I answer in the UNWTO I have established system for at least trying to sit down in one place, what the rules are currently with each of the countries in terms of entry. Mario, how effective is that? And how far has that got?

Mario Hardy:

Yeah, it's a new initiative. Although I had already worked on it before they add their own system, but now there's a collaborations between the two. And I just happened to have a look at it yesterday because my son wanted to travel and I said, "Oh, let's go and check what the tracker says". And it's quite comprehensive, it has a lot of information specifically for where, if I look at Thailand so, because I knew what the policies here I could compare them and it was accurate. It was a 100% accurate in terms of what was actually recorded in there.

So I think it's a good method for helping people within the industry to understand how these changes or how are we being affected because it keeps changing. It changes all the time. That's really difficult to keep track of where you can go, how you can get there, what are the protocols and procedures and steps you need to take in order to get to your destinations. What will you have to get through to it? Would you have to do a quarantine? How long is the quarantine? Do you have to do testing? Who pays for the testing? I mean, there's a million questions that people need to ask if they want to travel. The situation as I've said that I faced with my son recently who want to travel and complicated, really, really complicated.

Peter:

Well, that is encouraging news, but going back to the digital passports, I mean, how far away are we from that Subhas? I mean, even on a regional basis, is that a realistic proposition or are we going to be stuck with pieces of paper?

Subhas Menon:

Well, I wouldn't call it a digital passport as much as a digital tool to help travelers navigate to the travel process. So if you look at it from that point of view, I mean, the starting point is of course, a depository of all the different requirements that you need to undertake before you can go to a place. So, that is there. Secondly, also gives people information as to where they can go and get the tests done, where they can go and get the vaccination done, and how these labs and testing centers can send the certificates to the individual and last but not least, to send all these things to the all agencies to get your authority to travel. So all that is very good, but the stumbling block is that some of these things are not digital yet. You mentioned there is no digital vaccination or health certificates, and also both agencies are not going to give you a digital authority to travel. So we need the governments and the authorities to come on board to make this tower pass a reality.

Peter:

Is that happening?

Subhas Menon:

Yes, I think discussions are happening, but again, this is happening at a bilateral level, because the governments are very, very, very conscious as to whose certificates they're going to recognize. One of the standards, one of the formats and all the other, so many different ways of doing it. So the discussions are going on bilaterally, and that's going to take a hell of a long time before we [inaudible 00:25:59]

Mario Hardy:

Yeah. I mean for example, Europe is introducing their Green Certificates, which will be valid for crossing borders within the European Union, currently from the summer onwards. However, each countries are also doing their own. France is developing their own certificates too for even traveling within the country or going to public facilities or public events and et cetera. Now, imagine if you're coming from Asia and traveling to Europe and to different countries in Europe, now you have to use not only one to enter Europe, you have to use one for every country you visit also. I mean, it's going to be nightmare, complicated for people. And there's others too, the CommonPass is now actually being used as a beta test in various destinations across the world. The IATA Travel Pass of course, which is being used in several destinations as well.

And then you've got a few private entities who have created their own passes and many governments also creating their own, even provinces or states within destinations are creating their own. Canada's looking at their own, but some of their provinces are also looking at creating their own. So it's going to be complicated for a period of time to travel, to be able to find out, and that's why resources like the IATA, you ended up with your resource and I'm sure there'll be plenty of it. Or from the private sector, they will come up to will be a necessity moving forward to help guide travel agencies and people who actually booked your trips, but also the individual travelers who may be using an OTA or other resources to book their travel.

Peter:

Yeah. There are so many different levels of which there needs to be an understanding and an agreement makes it incredibly complex, but we're not even at that stage yet, I guess, where we can seriously talk about opening borders in this region. Let's focus on that one for the time being, and have that going in the background and then get the vaccinations going. Gentlemen, it's been great talking to you again. I'm sorry we're in a more somber mood than we were before. Let's hope the next time it's looking a bit brighter, but thank you for being with us and thank you for your insights, Subhas and Mario.

Subhas Menon:

Thank you, Peter. Nice to see you again Mario, all the best.

Mario Hardy:

Thank you, Peter. Yep, you too.

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