Brunei aviation industry loss lowest in ASEAN

Azlan Othman

Brunei Darussalam is forecast to experience the lowest loss of revenue in the civil aviation industry among ASEAN member countries at USD114 million, with about 8,500 jobs expected to be lost, according to a recent report from the International Air Transport Association (IATA).

IATA has doubled-down on its March forecast of the challenges facing the international civil aviation industry last month saying that the lockdowns and border closures could cost ASEAN airlines USD38.2 billion in revenues this year and see the loss of some 7.2 million jobs.

The airline trade association forecasts that COVID-19 will see global passenger revenues drop by some USD314 billion globally this year, a 55 per cent year-on-year (YoY) decline.

Asia-Pacific Airlines is set to see the largest fall, with a drop of USD113 billion. In its earlier forecast issued in March, IATA had predicted an estimated USD88 billion loss for the year.

Passenger demand is similarly forecast to decline, with the full year expected to see a 50 per cent drop YoY, up from the 37 per cent decline forecast in March.

Across ASEAN, air traffic passenger is expected to drop by an average of 49 per cent, compared to 2019, with Thailand, Malaysia, and Laos expected to see the largest falls in passenger demand.

Thailand is forecast to experience the largest loss in revenue at USD8.289 billion, marginally ahead of Indonesia at USD8.225 billion, with more than four million jobs expected to be lost in these two countries alone.

These estimates are based on a scenario of severe travel restrictions lasting for three months, with a gradual lifting of restrictions in domestic markets, followed by regional and intercontinental market.

“The situation is deteriorating. Airlines are in survival mode. They face a liquidity crisis with a USD61 billion cash burn in the second quarter. We have seen the first airline casualty in the region,” said IATA’s Regional Vice President for Asia-Pacific Conrad Clifford.

“There will be more casualties if governments do not step in urgently to ensure airlines have sufficient cash flow to tide them over this period.”

He identified India, Indonesia, Japan, Malaysia, the Philippines, Republic of Korea, Sri Lanka and Thailand as priority countries that need to take action.

IATA is calling for a combination of direct financial support, loans, loan guarantees and support for the corporate bond market, and tax relief.

“Providing support for airlines has a broader economic implication. Jobs across many sectors will be impacted if airlines do not survive the COVID-19 crisis. Every airline job supports another 24 in the travel and tourism value chain. In Asia-Pacific, 11.2 million jobs are at risk, including those that are dependent on the aviation industry, such as travel and tourism,” said Clifford.

“Airlines continue to perform an important role currently, with the transport of essential goods, including medical supplies, and the repatriation of thousands of people stranded around the world by travel restrictions. And after the COVID-19 pandemic is contained, governments will need airlines to support the economic recovery, connect manufacturing hubs and support tourism. That’s why they need to act now – and urgently – before it is too late,” he added. The airline body’s revision comes as the global economy continues its descent and IATA claiming global passenger volumes have returned to levels in 2006.

In March, IATA wrote to the heads of all governments in the Asia-Pacific region, appealing for emergency financial support for airlines, claiming the industry faced an USD88-billion revenue loss and a 37 per cent drop in passenger demand.

Meanwhile, the Association of Asia-Pacific Airlines (AAPA) said last month that the number of flights operated across the region had dropped 93 per cent in the first week of April, following border closures.

However, in a recent statement, the group said that governments must apply caution in their move to ease mobility restrictions, while urging coordination in developing common standards and re-establishing mutual trust.

While some limited domestic flights have resumed in Thailand, Malaysia, and Vietnam, social distancing requirements and public fear have industry watchers looking on with interest.

The civil aviation industry across the region is in critical care, waiting to see how much life support will be provided.

With international borders closed, previous visas cancelled and new ones not being issued, international air travel throughout the region is almost non-existent, except by diplomats and citizens returning home.