Coronavirus pandemic

Airline bankruptcies and job cuts expected, say experts

The International Air Transport Association has said that passenger demand for air travel is not expected to return to pre-crisis levels until 2023 or 2024.
The International Air Transport Association has said that passenger demand for air travel is not expected to return to pre-crisis levels until 2023 or 2024.ST PHOTO: ALPHONSUS CHERN

The hope of a quick turnaround in the global aviation sector - already dim - has become even dimmer with the global Covid-19 situation going from bad to worse.

More airline bankruptcies and job cuts are likely to be in the pipeline in the coming months once government support is reduced.

Mr Nicholas Wyatt, head of research and analysis in travel and tourism at analytics firm GlobalData, said governments are naturally keen to facilitate travel bubbles, given the economic significance of the tourism industry.

"However, most governments are adopting a safety-first approach and new waves (of Covid-19) will make them more cautious," said Mr Wyatt. "They will certainly monitor the situation in other countries before deciding whether to include them in any such arrangements."

This has resulted in some high-profile omissions from travel bubbles, such as Britain not including Portugal in such arrangements with 50 countries, he added.

Mr Wyatt said it will be hard to determine when the worst is over for the aviation industry as long as there are new waves of the disease.

The World Health Organisation last Saturday reported a record increase in global Covid-19 cases for the second day in a row, with the total rising by 259,848 in 24 hours.

Some places that had done a good job of controlling the pandemic, such as Hong Kong and Australia, are now seeing cases rising.

Aviation analyst Shukor Yusof of Endau Analytics said the new wave will "not only dampen appetite for bubbles but retard any likelihood of borders reopening any time soon".

He added: "There has been an over-exuberance on the part of airlines and other bodies wanting to restart flights when the danger of contracting the virus remains present. The industry should accept this is a long, bruising battle and not rush back into flying."

 
 
 
 

The International Air Transport Association has said that passenger demand for air travel is not expected to return to pre-crisis levels until 2023 or 2024.

"The reality is that airlines are in the very early stages of a long and difficult road to recovery and are nowhere near sustainable levels if international travel continues to remain closed or restricted," it told The Straits Times yesterday.

Independent aviation analyst Brendan Sobie from Sobie Aviation said the industry has been expecting a slow and choppy recovery.

But he said the main issue in terms of the recovery within the Asean region was the lack of a multilateral framework standardising air travel regulations. This would have helped to provide a platform for introducing travel bubbles among countries that have done well in handling the Covid-19 crisis.

Mr Sobie and Mr Wyatt agreed that more airline bankruptcies and job cuts could come amid a slow recovery of the sector.

 

Mr Sobie, who noted that airlines that have staved off job cuts have been helped by government schemes, said: "These schemes are not permanent, and it's not reasonable to expect governments to continue offering subsidies on wages to allow companies to maintain their workforce at the levels before Covid-19 when it's going to be a few years before traffic returns."

Toh Ting Wei

 
A version of this article appeared in the print edition of The Straits Times on July 21, 2020, with the headline 'Airline bankruptcies and job cuts expected, say experts'. Print Edition | Subscribe