COVID-19: The Extent of Impact on the Aviation Industry

An empty waiting hall. A non-existent queue at the check-in counter. A lone bag circling the baggage carousel. This is the effect of COVID-19 on some airports in affected regions.

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In light of the recent COVID-19 outbreak, many businesses are experiencing massive decline. Dun & Bradstreet researchers predict that over five million businesses across the world could be impacted by the disease. China, being a colossal powerhouse in the global economy, is home to the backbone of many companies. At least 51,000 companies worldwide have one or more direct suppliers in the affected region. Economic growth forecasts for 2020 are already being dampened by the impact of the outbreak.


Economic Impacts

The epidemic has taken a huge toll on a number of industries, especially the aviation industry. According to the International Air Transport Association (IATA), airlines in affected regions are facing a 13% decline in passenger demand. The IATA also warns that the collapse of travel in Asia could lead to a loss of $29 billion in airline revenue – and this figure is just with respect to airlines. The effect on the aviation industry widespread: from MRO organisations to OEMs to other service providers, COVID-19 has infiltrated the entire industry.

Further intensifying the effects of COVID-19 on the aviation industry, nearly all the predicted losses are expected to hit airlines in the Asia-Pacific region. This region is widely regarded as the industry’s new epicentre.


Grounded Aircraft & Suspended Routes

Amid the spread of the virus, grounded aircraft and suspended flight routes are large contributors to the decline in air travel. Major Chinese airlines, including China Eastern, China Southern and Air China, have a combined total of 483 grounded aircraft. This figure constitutes close to 32% of their total fleet. Airlines with smaller fleets, like China Xinhua Airlines, have 100% of their fleet grounded, while Henan Airlines and China Grand Air each have 67% of their fleet on-ground.

Singapore, one half of the busiest international city-pair in the world (KUL-SIN), has had its flag carrier temporarily suspend flights between major destinations such as London, Paris, New York, Seoul, Tokyo and Sydney. Hong Kong’s flag carrier, Cathay Pacific, has also temporarily cut almost all flights to mainland China. Furthermore, services to other locations are to be reduced over the upcoming two months.

Similarly, Qantas have cut certain flight routes. The Australian flag carrier announced that 16% of its Asia capacity is expected to be on hold until the end of May (or later, if required). The airline’s sole route to mainland China (SYD-PVG) remains suspended, while routes between Hong Kong, Singapore and major Australian cities have been reduced. Besides flight suspensions, another measure taken by Qantas is operating flights on smaller aircraft. Originally, flights between Melbourne and Singapore were operated by A380s; since the virus outbreak, these flights have been switched to B787s, which have approximately 250 less seats per flight. Domestic capacity within Australia have also been reduced by 2.3%.

Grounded aircraft and suspended flights have consequently led to a drastic fall in business in the MRO, cleaning and catering sectors.


Light at the End of the Tunnel?

The New York Times is quoted saying that nearly every industry is confronting a stark reality that business will not go on as usual. In response to the economic effects of the virus, China’s central bank has cut its rates, lowering the one-year and five-year loan rates. Likewise, the Singapore government has budgeted $5.6 billion Singapore dollars to help businesses, workers and households as financial buffer.

Hopes of eradication soar high across all industries, with longing expectations for the generation of economic activity so that in the near future, the economy is given a chance to recover itself. Until then, the aviation industry lies in hopeful anticipation.


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