As Coronavirus Ravages Global Aviation Industry

0

Chinedu Eze

Not even Severe Acute Respiratory Syndrome (SARS) nor Ebola Virus Disease, which were epochal epidemic diseases, has jolted the world the way Coronavirus is doing currently and the former with all its devastation, did not kill the number of people, which COVID-19 has already sent to their graves.

The most affected industry by the disease is air transport, which airlifts the highest number of people from one place to another and for long distances.

Aviation experts have posited that unless the virus is stopped now it would emasculate world’s economy, starting with air transport, if it lingers for another few weeks.

Lead Consultant, ETIMFRI Group, Amos Akpan, x-rayed the challenge faced by the aviation industry over the disease.

Akpan, explained how low patronage of the airlines by travellers due to the virus would constrict the finances of the airlines.

“Flight restrictions and outright ban has been the subject matter on the desk of aviation authorities in most governments throughout February 2020. The finance of airlines will be affected.

“They won’t meet targeted income. They will not have sufficient funds to service their fixed cost like monthly loan repayment, salaries, insurance, calendared maintenance and recurrent training etc.

“These are some compulsory expense subjects they must spend whether they operate flights or not.

“There will be issues of force majeure on the table of discussion between airline executives and existing investment funders in operation. The reason is because COVID- 19 may have to be discussed as a natural occurrence that affects compliance to existing contracts/deals.

In this regard, the insurance executives and consultants will be busy brainstorming the effect on existing policies,” he said.

Akpan, observed that most countries in the world including America and Nigeria had high volume of trade with China and passenger travels, import/export trade with China has stopped for some countries while others will reduce theirs to the barest minimum.

“Eventually, airliners management will cut cost. That is, they will reduce staff; lower equipment purchases and use less of leased/outsourced facilities. They will reduce flight frequencies, and out rightly cancel flights.

“Airlines like Emirates and Ethiopian whose financial performance impacts on their national economy have to rejig their program.”
Civil aviation authorities, IATA and ICAO have to come up with scenarios on surviving the impact of global pandemics like COVID-19 that the airlines would likely adopt to cushion the impact on their economics.

“In the immediate, aircraft will not be filled up, flights cancellation continues, redundant aircraft, redundant operational personnel will increase. Income will keep reducing.

“On the contrary, private jet travels may increase; the use of FBO or private terminals is expected to increase. In the long run, some airlines may not be able to handle the losses, and they will fold up or declare bankruptcy,” Akpan said.

He noted that the impact of COVID-19 on the Nigerian domestic flight operations was almost zero, noting that any low patronage on domestic flights in Nigeria would be a reflection of the usual first quarter lull caused by harmattan haze and slow business pick up in January/March season, adding that COVID-19 is yet to negatively impact local air travel in Nigeria.

On the global scene, Akpan said the big airlines have posted drops in demand. As at February 28 Lufthansa posted 25 per cent drop. The demand for international flight tickets for airlines in America dropped by 13.4 per cent. United airlines announced no flights to Beijing, Shanghai and Hong Kong, while they have drastically reduced their flights to Singapore, Seoul, and Osaka.

“KLM, Lufthansa, Easy jet have announced frozen recruitment and stopped new projects as at February 28 to avoid negative balances. Emirates issued internal memo advising staff to take vacation, some with pay and some without pay.

“The British Airways parent company IAG says it could not provide a profit outlook for 2020 because its shares have already fallen by 8 per cent, and they are down by a quarter in just 10 days. All these unpleasant news reports from the big airlines indicate rough times for the industry in 2020 courtesy of COVID-19,” Akpan remarked.

IATA has already predicted a fall in the demand for international travel more than noticed in the last 10 years because of COVID-19.

“Global Business Trade Association conducted a poll on 400 businesses. Most respondents confirmed they have cancelled meetings and events. The Swiss government banned all events involving 1,000 people and above. The following conglomerates have scaled down, suspended, or out rightly cancelled international travels: BP, BMW, Orange, Estee Lauder, Nestlé, L’oreal; howbeit temporarily because of COVID-19. My observations are: one, people do not want to travel. They are afraid to arrive a city and get quarantined, or the return flight might not operate because of increased infections,” Akpan added.