Airline revenues for first half to be ‘close to catastrophic’

By Arjay L. Balinbin, Senior Reporter

REVENUES of airlines in the first half of the year are expected to be “close to catastrophic,” aviation think tank Center for Asia Pacific Aviation (CAPA) said, as trunk routes will not be commercially viable.

“The revenue profile for airlines in this first half of 2021 looks something close to catastrophic, given that they’ve been holding their breath for so many months already,” CAPA said in an analysis posted on its official website on Jan. 11.

Some airline companies may see improvements in the second half of 2021, especially “towards the end of the year, but with only modest acceleration after the end of the first half,” it added.

The Philippines has so far banned the entry of residents from 28 countries, including the United Kingdom, United States, Japan, Germany, and Canada, where the more infectious variant of the coronavirus disease 2019 (COVID-19) has been detected.

The Presidential Palace announced on Tuesday that the travel ban will be expanded to residents from five more countries — China, Luxembourg, Oman, Pakistan, and Jamaica — starting Wednesday (Jan. 13) until Jan. 15.

CAPA Founder and Chairman Emeritus Peter Harbison was quoted as saying in the analysis that the current condition is best suited to low-cost carrier business models.

“They’re usually best positioned to benefit from the recovery process after a major shock. And the recovery will be led by domestic and international short haul leisure markets,” Mr. Harbison said.

He also said that trunk routes “will not be commercially viable.”

CAPA expects business travel to be at “as much as 50% of previous levels” in the second half of 2021.

Mr. Harbison also described the impact of the vaccine rollout on international aviation this year as “just a slideshow.”

“The rollout of vaccines will take many months, and we have already seen significant delays and clear indications of difficulties in the supply chain,” the aviation think tank noted.

“Vaccination priority is going to be given to categories who actually have, in most cases, lower travel propensity. The younger, healthier people will not receive vaccinations till later in 2021 — that’s if they receive them at all in 2021,” it added.

Mr. Harbison believes that “government subsidies are going to be needed to maintain core international truck routes, at least in the short term, because they’re going to be largely unviable at least until well into 2022.”

Low-cost carriers Cebu Pacific and Philippines AirAsia have both launched a “piso sale” offering to boost domestic travel.

Philippines AirAsia on Monday said it started seeing positive signs in domestic tourism.

In November last year, the Finance department said it was informed by the flag carrier, Philippine Airlines (PAL), of its plans to seek court protection from its creditors.

The airline sector is really “under severe stress,” Lance Y. Gokongwei, president and chief executive officer of Cebu Pacific’s listed operator Cebu Air, Inc., said recently.

PAL Holdings, Inc., the listed operator of PAL, saw its net loss hit P28.85 billion as of the third quarter of 2020, or more than three times the P8.49-billion loss recorded in the same period in 2019.

Cebu Air swung to a net loss of P14.69 billion during the January to September period, from the P6.77-billion profit it generated in the same period in 2019.