COVID-19 Impact: How Southeast and South Asian Airlines are faring

By Lee Kah Whye
Singapore, February 22 : Recovery in air travel appears to have stagnated. This was one of the findings in a report published earlier this month by the International Air Transport Association (IATA) based on its December data.
In its Air Passenger Market Analysis for December 2020, IATA said that Industry-wide revenue passenger-kilometres (RPKs) fell by 69.7 per cent year-on-year, which was broadly in line with the declines in November and October. This is due to the global resurgence of COVID-19 cases which has caused governments to reintroduce shutdowns and new travel restrictions. Forward bookings have been falling sharply since late-December, pointing to a challenging start for 2021.
In 2020, passenger traffic plunged 66 per cent, by far the sharpest decline in aviation history. This is eight times faster than during the 12 months following the 9/11 attacks -considered to be the most severe aviation crisis prior to 2020. In 2020, the industry-wide passenger load factor was on average 64.8 percent which is 17.8 percentage points lower compared with 2019.
New and more aggressive virus mutations have resulted in travel bans in several key markets including the UK. Although vaccine rollout is good news for air travel, immunisation has started slowly in many countries, and it will take time before its impact is reflected in passenger numbers. For now, willingness to travel is low based on the evidence from bookings for future travel. In January this year, bookings were down about 70 per cent compared with pre-pandemic January 2020.
Airlines had been cautious about adding capacity back to the market during Q4 amidst slowing demand recovery. The industry-wide available seat-kilometres (ASKs) fell by 56.7 per cent year-on-year in December - a similar decline as in the previous two months. In 2020 as a whole, seat capacity was down 56.5 percent. Global passenger load factor (PLF) remained in record lows in December, at 57.5 per cent.
Overall, 2020 was a dismal year for this metric as most carriers struggled to adjust their capacity fast enough to collapsing passenger numbers and frequently changing travel restrictions. On average, the global PLF was 17.8 percentage points lower compared with 2019, at 64.8 percent.
In December, IATA estimated that airlines suffered a net loss of USD 118.5 billion for 2020 and predicted that they will collectively lose USD38.7 billion this year.
Among Southeast Asian airlines, Singapore Airlines (SIA) has made the most progress strengthening their balance sheet and securing the company's future. This is despite the fact it does not have a domestic market and hence impacted more severely by the pandemic.
Two weeks ago, SIA, which has a joint venture airline, Vistara with Tata Sons, reported a better set of results for the quarter that ended December 2020 compared with the previous quarter. Although the flag carrier of Singapore suffered USD 106 million in losses, it is a vastly improved figure compared with the USD 1.75 billion net loss it posted in the prior quarter.
A total of USD 9.93 billion of funds were raised through various equity and bond issues earlier in 2020. Cash and bank balances now stand at a healthy USD5.3 billion. The company said it has access to a further USD 1.57 billion in committed credit lines, along with the option to raise up to USD4.6 billion in additional mandatory convertible bonds. It is estimated that it has enough in its war-chest to whether the COVID-19 storm into 2024.
Malaysia's AirAsia, the leading low-cost carrier in the region reported improved operating metrics in the quarter that ended in December 2020. This is mostly buoyed by an increase in domestic travel in its key markets. AirAsia Thailand carried 31 percent more passengers, AirAsia Philippines doubled the number of passengers it carried while AirAsia Indonesia's passengers carried spiked an impressive 11 times. In a statement, the group said AirAsia Malaysia closed the fourth quarter of 2020 with 834,934 passengers carried and achieved a 72 percent load factor.
In November, AirAsia reported a fifth straight quarterly loss for its Q4 which ended September 2020. It ended its 2020 fiscal year with a net loss of USD 788 million after a net loss of USD 266 million in Q4. CEO and founder Tony Fernandez said in an interview with CNBC that the company is looking to raise up to USD 618 million for the whole group including its digital and logistics business. He added that the airline is expected to be flying most of its pre-COVID routes by the end of 2021.
Recently, it gave up 32.6 percent of its stake in AirAsia India to majority shareholder Tata Sons for USD 37.7 million, leaving it with 16.4 percent of the airlines that still bear its name.
The future of its long-haul, separately listed affiliate, AirAsia X (AAX) is less certain. AAX is seeking to restructure debt of MYR 64.15 billion (USD 15.9 billion) and last week received court approval to convene creditors meeting. This despite objections by two of its creditors, lessor BOC Aviation Ltd and Malaysia Airports who have been quoted by the media as saying that AAX is "hopelessly insolvent".
National carrier, Malaysian Airlines, is reported to have in the last weeks obtained in-principle agreement from almost all its creditors and lessors for its restructuring plan, after months of negotiation. Reuters reported that the company hopes to conclude the restructuring process by the end of the first quarter this year which will result in around 40 creditors and lessors taking a "haircut" under its USD 4 billion debt restructuring scheme.
Thai Airways on the other hand is still being supervised by the country's Bankruptcy Court, which is awaiting a restructuring plan to approve, having accumulated USD11 billion in debt. Deputy Prime Minister Wissanu Krea-ngam, who chairs a committee looking into the flag carrier's financial woes, said that Thai Airways is expected to submit its rehabilitation plan by March 2. This is the second and final extension of the deadline. If approved, the next stage would be for the airlines to convene creditors meetings and following that, a vote on the plan. If any of these steps does not result in a positive outcome, it may mean liquidation for the 60-year-old airline.
Philippines Airlines received an approximately USD 600 million cash injection from its shareholders, about half of which was from main owner Lucio Tan after the Philippine government declined to rescue the national carrier. Earlier this month, it announced that it will be laying off 30 percent of its employees or about 2,300 staff in March 2021. This is after other human resource cost-savings measures and the sale of non-aviation assets have not been enough to keep the airline afloat. Although a ban on foreign tourists is still in place, there have been local flights with the airline reportedly restoring about 30 percent of its weekly, mostly domestic flights.
Unlike its Thai and Philippine counterparts, Garuda, Indonesia's flag carrier, was reported to have received USD 580 million support from the government. The Nikkei newspaper reported that it is looking to merge Garuda with another eight tourism companies including low-cost carrier Citilink and seven other state-owned companies which include airports, hotels, department stories and an ancient Buddhist temple. It has also been cutting costs by reducing headcount by about 20 percent and reported a net loss of USD 728 million for the first half of 2020.
Centre for Aviation (CAPA) India estimated that passenger traffic in India for 2020-2021 will be at about a quarter of the level in 2019-20 and that the Indian aviation industry will lose an aggregated USD 6-6.5 billion in FY 2021. The two largest airlines in India, IndiGo and SpiceJet both turned in red numbers for the half-year ending September 2020, reporting net losses of USD 562 million and USD 97.7 million, respectively. The government has also been trying to find a buyer for indebted national carrier Air India in a long drawn-out process.