Asia stumbles in her assault on the skies

Airbus planes in Rostock (Germany) last September waiting to be delivered to several Asian airlines. Dpa / picture alliance via Getty I

Before the debacle caused by the pandemic, the Asian airline industry, thanks mainly to China, was emerging as the most thriving on the planet, destined to generate more than half of new passengers in two decades.

As in the whole world, the paralysis caused by the coronavirus has shaken it strongly, generating turbulence from which it tries to escape to avoid plummeting.

Although the second world economy seems to come to the rescue on the continent, a redrawn airspace is not ruled out when the storm subsides.

The International Air Transport Association (IATA) predicts even more devastation for the world industry in 2021. Thus, in its November report it estimated that the air sector will suffer a total net loss of 38.700 million dollars (31.983 million euros), in contrast with the 118,500 million lost in 2020. The agency trusts that the aggressive cuts undertaken by the airlines and an increase in demand, due to the expected reopening of borders thanks to a greater test of infections and the impact of vaccinations, will return the industry to positive terrain in the last quarter of the year.

There is a lot of hope in the injections.

European Union leaders are discussing a Greek proposal on certificates that "facilitate freedom of movement" for vaccinated people, and five airlines already offer passengers the use of a digital card that guarantees that they are "free of covid", an initiative supported by the World Economic Forum.

“I am a fundamentalist of vaccines.

I believe that the system is going to recover, with a return to air traffic in 2019 by the end of 2022 ”, predicts Richard Aboulafia, vice president of the consulting firm Teal Group, specialized in aviation.

In this recovery, the Asia-Pacific region plays a decisive role, without much doubt that it will continue to dominate the growth of international aviation in the coming decades thanks to the prosperity achieved by countries such as China, but also India, Indonesia or Vietnam.

Almost all eyes are now on the second world economy.

Due mainly to an early control of infections, which allowed the reactivation of domestic flights - which recovered by 94.5% in relation to the previous year in the last quarter of 2020 - China expects to register up to 90% of the volume of passenger air transport before the pandemic this year.

Although the Civil Aviation Administration of China (CAAC) said in January that efforts will focus on increasing domestic demand, the country will also promote the resumption of international flights throughout this year.

Aspirations that breathe optimism for aviation in Asia, with many nuances.

For Aboulafia, the pandemic has led Beijing to strengthen the state management of the sector, with its three largest airlines (Air China, China Eastern Airlines and China Southern Airlines) being "forced" last year, he says, to acquire its first COMAC ARJ21 , the regional jets manufactured by the homonymous state company.

"If China follows this trend, its sector will grow at a much slower speed and, consequently, Asia will not reach the high levels anticipated before the pandemic," the expert considers.

It is not the only expected obstacle.

As in other parts of the world, one of the biggest challenges is avoiding bankruptcies and mass layoffs.

While countries with the possibility of boosting domestic demand have it easier, places like Singapore, a city-state with one of the busiest airports in the world before the pandemic, or Hong Kong find enormous difficulties.

Although both governments have provided substantial aid packages to their flagship airlines, Singapore Airlines (SIA) and Cathay, they rely on international traffic for their long-term viability.

Southeast Asia was one of the fastest growing markets before the pandemic.

While the high demand sustained it, the freeing up of airspace led to fierce competition between low-cost airlines and large carriers that had already squeezed profits before the coronavirus, leaving many in a state of extreme vulnerability.

State-owned companies, although with direct access to government capital, are not without problems.

Thai Airways, the Thai company, declared bankruptcy last May and recently announced the suspension of 75% of the workforce that still works until May;

the same fate appears to await Malaysia Airlines, while Indonesia's Garuda cancels orders for forced-march aircraft to avoid a similar design.

While some low-cost airlines - including JetStar and Scoot - which are wholly or partly owned by large groups, benefit from parent funding, independent ones - such as AirAsia or LionAir - do not have that advantage.

Their options to survive are to adapt to the new market, easier for those with a larger fleet of narrow-body aircraft that cover domestic or short-haul routes, the fastest to recover, or restructure their business model to generate new routes. from income.

For example, Scoot has modified the interior of its passenger ships to transport cargo, and Cebu Pacific has chartered planes to carry food, water and medical equipment across the Philippines.

Layoffs

“Restructuring is not a panacea.

Anything that is done without layoffs or cuts has no chance of success.

The airlines that survive will be those with full coffers, exceptional management and government support, ”says Shukor Yusof, founder of Endau Analytics, an aviation consultancy.

The cuts are still controversial for many reasons.

Their obligatory existence adds a layer of suspicion that they are destined for the wrong departures, especially when accidents happen like Sriwijaya Air, Indonesian low-cost airline, which crashed in the Java Sea on January 9 with 62 people a board, without yet knowing the cause of what happened.

But there is light at the end of the tunnel.

Airlines have weathered storms since the 1950s, including the 1997 crisis or SARS, although not all are expected to survive.

Until international air traffic is fully resumed, those with the most options to stay are those exposed to domestic and regional traffic.

“Low cost operators dedicated to international travel are another story.

Their survival cannot be assured ”, predicts Aboulafia.