Asia Aviation: Inspiring clear action for aviation growth

Transcript

Peter Harbison:

Welcome to this discussion about what's happening in the Asia Pacific region in the travel and aviation sectors. I'm delighted to have with me again, Subhas Menon, who's the director general of the Asia Pacific Airlines Association, and Mario Hardy, who heads up the Pacific Asia Travel Association, which covers most of the region and beyond in terms of the travel side. Welcome gentlemen, good to have you with us.

Mario Hardy:

Good morning to you.

Subhas Menon:

Thank you Peter. Good afternoon. Yeah.

Peter Harbison:

Let's kick off, Subhas, if we could, with very much on the airline front. What developments have happened in terms of airline survival, government support, even new entry that really is of interest to us as we move along?

Subhas Menon:

Yeah. Well, the passenger traffic was showing some signs of life towards the end of 2020, November, the month on month growth, single digit, but at least it was in the right direction. Also, there was a lot of optimism because of the discovery of vaccines and the start of rollout of vaccines. Everything came to an abrupt at the end of 2020 and '21 didn't start well. January we saw the numbers race backwards, even lower than what it was in 2020.

Subhas Menon:

The forward sales are all looking pretty grim. The silver lining is cargo. Cargo is doing extremely well because of the rising demand for speedier delivery of merchandise and also vaccine, distribution of vaccine is also helping cargo. Today, Singapore Airlines just announced that their losses were reduced because of cargo revenue. There is a good sign, but of course when passenger numbers are down, capacity is down, there's also very little valuable capacity for cargo.

Subhas Menon:

It is not very sustainable just to rely on cargo. Governments are actually spooked by the surge in virus cases in Europe and America as well as the mutation of the virus. Understandably they have become more stringent with their border controls. Almost every country in Asia has actually introduced huge restrictions on travel, even banning people from coming in from specific countries, if they are from UK for instance or South Africa. That's not doing very well.

Subhas Menon:

I guess they are all scratching their heads, even Victoria doesn't allow people from New South Wales to come in. What are we doing allowing Sydney-siders to come into Singapore? There you have it. The Singapore Hong Kong bubble was going to be a big-

Peter Harbison:

Sorry, Subhas, just before we go into that, and I'd like to address that in some detail later, can we just stay with the airlines at the moment? I mean, obviously cargo, it's a small cherry, but as you say, obviously it does give a bit of cash flow. Almost every airline in the region is burning cash very, very heavily still especially those which rely entirely on international operations.

Peter Harbison:

Are we seeing any concerted ... I mean, obviously as the representative of most of the airlines in the region, are we seeing governments recognizing that something needs to be done because things aren't going to get better in the next month or two?

Subhas Menon:

Yeah. I mean, they are, governments are doing whatever they can. A lot of it is focused on the staff resources in terms of wage relief, as well as subsidies, but there are also a cash injection. I mean, we saw in Indonesia, this was done in Malaysia also. Now they are working out the numbers for the airlines, but by and large airlines are also seeking their own measures to improve their liquidity. Singapore Airlines, Cathay Pacific through their shareholders, Philippine Airlines also shareholders.

Subhas Menon:

Malaysia Airlines has been talking with the lessors and they announced recently that by the end of March they will reach some agreement. Thai Airways is going through the courts, bankruptcy courts, to organize funding for themselves. In Korea, they have come up with a unique solution. Instead of duplicating the problems they are coming together so that the government has only one headache. Different solutions but I think it is forthcoming.

Subhas Menon:

A lot of the discussions are happening behind the scenes, but the airlines are still operating and they are still on their feet for the time being. Yeah.

Peter Harbison:

Do you think the governments are doing enough though? I mean, we've seen much more active involvement from governments both in Europe and in the U.S. particularly. Could they be doing a lot more and should they be doing a lot more in Asia?

Subhas Menon:

I think they can do much more and they have the capacity to do much more. I think they will because it is such an important part of the economic makeup of Asia, tourism as well as air transport. I mean, Asia is not contiguous. They need this tremendously, so they will support. What I understand, for instance Garuda is explaining to me that without air transport the whole country will fall apart. They cannot be connected.

Subhas Menon:

The government, I think they have pledged the support the airlines need and they will be providing the necessary help to make sure that the air transport industry survives. Yeah.

Peter Harbison:

I know you represent primarily the so-called flag carriers, but when we talk about Indonesia, for example, Lion is obviously the biggest operator in the domestic market. Are they getting the same attention as say Garuda would be?

Subhas Menon:

Yes, I think so. I mean, the latest announcement I think they were also dishing out help for all the airlines, not just Garuda. Yeah.

Peter Harbison:

Right. Right. Well, thanks for that. Mario, to bring you in, when we last talked, I remember you were fairly confident in Thailand, for example, that the COVID had been pretty much kept at bay because of things like wearing masks and just generally being very sensible about things. You've obviously just now had a breakout and I don't think it's totally under control yet, but mainly around the capital city, Bangkok.

Peter Harbison:

A little bit about Thailand, but also how you see the other countries going too, in terms of upticks in the number of cases and how it's affecting the government attitudes towards tourism.

Mario Hardy:

Yeah. I mean, Thailand, we have to put things in perspective. From our point of view here in Thailand, we think that what happened over the last couple of weeks is a big problem. For the rest of the world when they looked at Thailand, they said, "Oh, that's nothing." Mainly because what happened is we had some migrant workers crossing the border and bringing a variant of COVID with them into the country, went to a fish market and started to infect other people.

Mario Hardy:

As they move around from province to province, it started to spread. Essentially, yes, last time we talked, we had zero, maybe one case in the space of six, seven, eight months. We're all thinking, "Oh, this is fantastic. This is great. We feel safe here." Despite this, nobody relaxed protocols. People were still wearing their mask and everything else. Then suddenly this happened and now we have an average of about 700/800 cases a day.

Mario Hardy:

Now, if you compare this to other parts of the world, it's insignificant, but for Thailand it's a big concern going from zero to a thousand or nearly a thousand in the beginning. It is going down and Thailand, as it did before, will get things under control, probably over the next couple of weeks. But life carries on. Most offices, government offices have been closed for the last five weeks. Ours was closed.

Mario Hardy:

We've just reopened this week and people are starting to go back to offices to a normal life. However, borders are technically still closed. It is open for special visas and long-stay visas. It is a complicated process, but people who really, really miss Thailand that much can go through it. Obviously they're more than welcome to visit, but mass tourism or full reopening as we've experienced before, the 39 million visitors that we had pre-COVID-19, that's going to take a long time to see these numbers again in Thailand.

Mario Hardy:

Roughly I think the numbers for last year were close to 7 million visitors. Primarily because the first quarter that's when most visitors actually came in. For the rest of the year, it was probably about less than 200,000 visitors for the rest of the year. Other countries in the region also are experiencing a rise in cases. In Malaysia, as Subhas mentioned before, but also Korea, Japan, and other countries within the region here.

Peter Harbison:

Just talking on Thailand, and it doesn't just apply to Thailand, obviously, China is a massive inbound tourism market for Thailand. What's the status of air services between the two countries now? I presume China, for example, is still doing a fortnight's quarantine on return to China.

Mario Hardy:

Yeah. I mean, there's barely any service to China, only essential services for the moment. Our understanding is that actually China also wants to contain their citizens. Traveling overseas or abroad from China is I wouldn't say banned, but discouraged. Certainly people traveling to China also borders are closed at the moment. I'd say there's practically no traffic between Thailand and China with a few exceptions of maybe some business people coming in on either private jets or some charters.

Peter Harbison:

Right. I mean, we're in the Chinese New Year, typically the Chinese New Year holidays, which are massive. Are you seeing tourists from anywhere else into Thailand?

Mario Hardy:

There are still some coming in on a daily basis, but very, very, very small numbers, mainly because the protocols in place for people to come in, sure they have to do quarantine, but the applications of the long-stay visa process, which needs to be done in person at your embassy, you need to apply for what they call the ASQ. There are certain hotels that will actually host you in terms of quarantine, which is very strict. You are being monitored.

Mario Hardy:

You can't leave your room for those two weeks period. You need proof of insurance, which is also a big challenge. Many insurance around the world, even though may say they cover COVID-19, I would encourage everyone to pay attention to the fine prints. There are a lot of limitations around it. Also, lots of other conditions that needs to be met for people to come to show that they have the means to be staying here for at least a minimum of three months or an extensive period of time.

Peter Harbison:

Right. Just moving on to the government roles in trying to reopen borders for international operations, what moves, if any, are being made to try to create the formula for green corridors or bubbles, bilateral or whatever? Is that gone back on hold because of what's happened recently? Or is it still moving ahead quietly?

Mario Hardy:

Yeah. From our perspective, what we've seen, last time we chatted, there was a lot of discussions around corridors. Some were already planned, there were ongoing discussions to open more. These discussions have been altered. There's not been any discussions that we've heard from our respective governments that we look after here for opening up new corridors in the near future for the moment. All these discussions are a little bit on hold at the moment.

Mario Hardy:

I do believe they will come back but for the moment, I think everyone is focusing on controlling the respective situations in their destinations.

Peter Harbison:

Yeah. Thanks. Subhas, obviously IATA has played a very important role in trying to, basically in crude terms, knock heads together at government level. Are there still moves afoot in this region to try to get governments talking to each other to grab some standards? I know as you say, here in Australia where we're lucky if we ... Well, we are lucky. I know extraordinarily, we only have one or two cases a day across the country, but even so, our borders are largely closed or close quickly, which I think is the big point.

Peter Harbison:

They open and then they close quickly and that's really the big disruptor for airlines, isn't it? I guess that's where a lot of your attention is from the airline sector being paid to trying to get some common standards for governments in the region. Is that a correct assessment?

Subhas Menon:

Yeah. Common standard is very important. I mean, at the moment, I think it's no point in pushing for borders to reopen because naturally all governments are focused on trying to get ahead of the virus spread. At the moment the border requirements are so desperate and it's like a labyrinth if you want to travel from place to place. How do you put all these things together? The industry is I think investing a lot of its time and resources in coming up with a smart travel solution.

Subhas Menon:

Something that puts all the requirements together. Public health information, as well as accreditation of testing centers and labs for vaccination, as well as a authenticated certification model, a standardization of the documents for certification, travel identification, as well as border access authorization. All these things into a app. There are several apps that are already in the offing. The IATA itself has its own digital travel app, Travel Pass.

Subhas Menon:

Then there is CommonPass, there is SimplyGo, AOK, SITA. They all have these modules. They're all interoperable, but that is as far as the industry goes. What we need on the government side is for them to come together to standardize the documentation for certification, as well as come to some agreement as to how they're going to allow the border access controls to be part of this travel solution. ICAO is spearheading this part of it.

Subhas Menon:

I think that will require a multilateral agreement between governments among governments to go ahead with this. We are using this downtime to get all the frameworks and the necessary processes in place, because at the end of the day, travel now will probably reopen when there's vaccine equity, when vaccines are distributed to majority of the populations. As you said earlier, it's either one has it and everyone has it or not. That sort of a situation has to go on.

Subhas Menon:

Really, the timeframe for borders to reopen is really tied to the vaccine ability, immunization of population, and also understanding on transmissibility, whether vaccines can also address that. Once that is done, I think borders will reopen, but in the meanwhile, the industry is trying to make sure that we are ready for the reopening.

Peter Harbison:

Just going back to the intergovernmental side, Subhas, I know obviously ICAO is the key body from aviation point of view. It has never really been all that effective in terms of making change because it's such a large body and quite often quite political. This is a multi-layered thing, isn't it? One of the reasons, or the key reason why borders are continually being closed is because it's the health authorities who are the [crosstalk 00:17:44].

Peter Harbison:

We really need to get the UN talking to the ... ICAO rather, talking to the WHO much more effectively. Is that a dialogue that IATA is trying to get involved into or you're [crosstalk 00:17:57] some ways?

Subhas Menon:

Yeah. Definitely, I think you hit the nail on the head. There's a dichotomy there. WHO is actually very involved. As you know, ICAO are truly out of character. They produced the CAT guidance in June after just three or four weeks, you know? That was very surprising, but very effective. They have moved on to CAT II. Now they are into CAT III and CAT III is really focusing in all these important elements of standardization and harmonization, these things.

Subhas Menon:

WHO, ECDC as well as CDC and Public Health England, they're all involved in this process. We are optimistic that at least something will come out of it. The process will take a bit of time but we do have a bit of time, unfortunately, because it takes a bit of time before the vaccine is effectively distributed.

Peter Harbison:

Yeah.

Subhas Menon:

Yeah.

Peter Harbison:

Mario, let's pick up the vaccine issue. There obviously is going to be a massive disparity between the haves and the have not as things roll out. We've seen Israel move ahead very, very quickly. The UK is moving very fast. The U.S. will move very quickly now. We've seen the battles, the jab battles between the EU and the UK, for example, just in terms of it's mine, I want it. No, it's mine. I want it. What's the perspective?

Peter Harbison:

What's the prospect like in Asia, looking across the different countries for getting vaccinations here?

Mario Hardy:

Yeah. I think that you've described the situation really well. Each country's situation is very different. Recently Samoa, who's a member of PATA, reached out to us and say, "Hey, we haven't got any vaccines lined up yet. We're a small population. We're heavily dependent on tourism. Can you help us?" Because Samoa actually mostly receive a lot of aid support from different countries and on that list of the many other countries that the World Health Organizations and others will be assisting in providing vaccines.

Mario Hardy:

They're way at the bottom of the list at the moment. It's a population of 197,000 people. They could probably vaccinate the entire population in a month and get back to some form of normality quite quickly. There's a big disparity between countries. Here in Thailand, we still do not have any vaccinations started yet. It is meant to be starting this month but for whatever reason it's being delayed. We're a large country where it's a population of over 60 million.

Mario Hardy:

We'll take time to vaccinate everyone. We're heavily dependent on tourism and without the vaccination, well, I'm afraid border is going to remain quite closed for a bit. That's a big concern for many destinations and hotel operators, tour operators and businesses here in Thailand.

Peter Harbison:

It's one thing to get the vaccines. Of course, it's another thing to distribute them, which depends an awful lot on the health system, which in most countries are not geared to this level of rapid vaccination, are they?

Mario Hardy:

Yeah. Well, Thailand, as you may know, has a good reputation for have an extremely good healthcare system, amongst the top ones in the world, mostly from the private hospitals. [inaudible 00:21:35] being raised by some is, well, will the more fortunate ones be able to purchase the vaccine from a private hospital or should it be as other countries do, vaccinate your seniors, the ones who are more at risk than others first as other countries have done?

Mario Hardy:

These type of questions are starting to appear now. As they're appearing here, I'm sure they appear in other places too.

Peter Harbison:

There's also the issue of the vaccine politics, isn't there. I mean, China has been trying to use it as a means to close or to tighten the links with some of the countries that it's been interested in from a trade point of view. It also has obviously a very important interest in showing that it can actually help the rest of the world to recover. At the same time, when we talk about things like passports, recognition of the different vaccines is something which is very much an unknown. Where will Thailand be looking, for example, for its vaccines from?

Mario Hardy:

Thailand is already at agreement quite early stage with AstraZeneca because we have labs here in Thailand. The plan is to produce it here locally, but also has acquired now vaccines from China. Also, I believe Moderna or ... no, not Pfizer, Moderna, the other one.

Peter Harbison:

Yes. Would that be common within the region? I mean, I'm thinking, for example, the Philippines, which is really being ravaged by the disease, where would they stand in line for this? Are they really looking with the dispersal across hundreds of islands? How can they look at the prospect of getting their entire population vaccinated? How long is that going to take?

Mario Hardy:

I think countries like the Philippines or Indonesia, which are thousands of islands will take time. We have the challenge, as Subhas mentioned before, that no cargo transportations between islands and between the different destinations with the reductions of flight capacity and et cetera. It's going to take far longer than probably other countries, which are either landlocked or as Thailand is pretty much in one location.

Peter Harbison:

Yeah. [crosstalk 00:24:03]-

Subhas Menon:

Yeah. When you talk about a vaccine politics there is also WHO. They have a vaccine, COVAX. I think there are two Asian notes for the distribution. One is India, the other is South Korea. WHO has been more strident about their position that you have to think about the emerging markets and developing countries and things like that. I wonder if they will step in and push the arm vaccines to bring about some equity in the distribution so countries like Philippines, Indochina, the whole of Indochina, Indonesia.

Subhas Menon:

Indonesia actually is fine because actually they have an agreement with China for the Chinese vaccine. I think they will be starting their vaccinations very soon. I think already the leaders have got it. Usually they start with leaders everywhere and then the rest will follow. Yeah.

Mario Hardy:

Yeah. The area that I'm getting increasingly concerned about this is something Subhas mentioned before, is that as populations are getting vaccinated now in quite accelerated rate in certain countries like Israel and others, we still don't have a unified harmonized standard for tracking the information, like a health pass or a health passport as it was mentioned before. Agreed between countries or between regions to keep track of this information.

Mario Hardy:

If I get vaccinated today, I'll probably get a piece of paper. I'm sure, as you know, those are already available on the black market, you can buy fake ones. Having either the CommonPass, the IATA Travel Pass or others to be talking to each other, but also the ability to verify that those vaccinations are legit. What type of vaccines you received, when you received it and et cetera, so there's a good tracking system in place.

Mario Hardy:

What concerns me is that while we're getting people vaccinated, we still don't have these standards in place at the moment. It's going to be really difficult to go back and backtrack and find out all these piece of paper, digitize information, ensuring they're legit and et cetera as we vaccinate more people to keep track of it. Yesterday, I was addressing the tourism ministers of the ASEAN countries. I pleaded with them.

Mario Hardy:

I said I urge them to please, at the very least, within the ASEAN countries to standardize their health and border crossing protocols to ensure that at least between the 10 countries, we can travel in a seamless manner or sort of seamless manner. As opposed to ending up having 10 different applications on your phone to be able to communicate with each other as to explain that you've been vaccinated here and here and are actually accepted.

Mario Hardy:

We had situations where people were traveling between destinations and the testing at departure was different than the one at arrival. Meaning actually you boarded a flight and they're saying you're okay. You've been tested, you're negative. You arrive at the other end, they say, "Oh, we don't accept this test." "Well, what do I do now? I'm already here." "Oh, you need to get tested again." Which is fine. I support being tested both at arrivals and departure, but at least accept each other's testing.

Peter Harbison:

Yeah, and-

Subhas Menon:

Testing is one thing and the other is a format. Sometimes they say "This format I don't accept." You're already at the airport of arrival and you're not allowed in. These are things that we need to sort out before borders reopen.

Peter Harbison:

Yeah. By the same token, of course, Subhas and Mario, nothing really has happened in that regard for at least two months. I mean, we don't seem to be making any progress with these things. That's what really concerns me I guess. The point Mario makes, the standardization and so forth with recognition is really a critical thing. Trying to catch up once all these things have been unraveled over a period of months is going to be an enormous task.

Mario Hardy:

This is where I wish that World Health Organization and ICAO would come together, jointly together and say, "These are the standards that actually should be implemented across different destinations and countries and et cetera." Or, even if they're recommended practice, they can come out really strongly and make recommendations of what they should be. Hopefully many countries would endorse and move forward with it and make things a little bit easier and move faster.

Peter Harbison:

Typically-

Subhas Menon:

Yeah. I think that is happening right now but even if ICAO and WHO can come up with a standard we still need governments to accept it and implement it, you know? That is the next stage.

Peter Harbison:

Well, typically with these things, you tend to need some torchbearers, don't you? Like the U.S., like the EU, like the UK, some of the big aviation powers, particularly who will actually make some moves and have their voices heard. Obviously it's going to be different in the U.S. now where we have an administration that actually believes it is a problem. The UK is preoccupied with its own issues, the EU likewise. Maybe we can look at something happening in a couple of months, but meanwhile it's a rather precarious situation.

Peter Harbison:

I think we have to wrap it up here, gentlemen. I think in retrospect, just looking through what we've talked about, if anything, the situation has probably gotten worse in this region since we last talked and in the last two months, which is not something that provides a lot of comfort, both in terms of the proliferation of COVID, but also in terms of really not seeming to be a whole lot of movement at government level. That's got to be a concern a little bit.

Mario Hardy:

Yeah. At PATA, we've released just two weeks ago, our annual forecast or what I would prefer to call, in this instance, scenario planning and because forecasting in a crisis like this is nearly impossible. What we looked at is instead of looking at five years ahead as we normally do, which will be impossible at the moment, we're looking at three years, but look at different scenarios. Severe, mild and of course, a more optimistic version of it.

Mario Hardy:

I would actually tend to believe at the moment for 2021, looking at the more pessimistic version of the plan in terms of visitor arrivals in the respective countries, but with the hope and anticipation that 2022 and 2023, we would start to see a rebound again.

Subhas Menon:

Yeah. Peter, my take is that at least we have a solution. Vaccine is a solution so there is some cause for optimism. Of course, the implementation and the mechanics are bogged down in detail because of government's preoccupation with trying to contain the virus. Once they get into the groove of things and they realize what is happening to their economy and also those who are dependent on the aviation sector for survival and growth, I think they will get their act together.

Peter Harbison:

I think we need to end on a positive note. Yes. Thanks Subhas. From what I hear from Mario, 2021 doesn't look good, but let's look at 2022. Thank you very much, gentlemen. Always good talking to you. I'm sure we'll get you back again in the near future to see if things have improved again. Thank you.

Subhas Menon:

Thank you, Peter.

Mario Hardy:

Thank you.

Subhas Menon:

Nice talking to you.

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