Local airlines are bracing for the significant impact of the corona virus disease 2019 (COVID-19) on their financial performance this quarter.
Flights to two of the biggest tourism markets, both inbound and outbound, have been suspended in response to government-imposed travel restrictions to combat the spread of COVID-19 in the country.
Due to the COVID-19 scare, passengers are cancelling flight bookings. Airlines have also noted a slowdown in reservations and bookings.
Philippine Airlines, Cebu Pacific and AirAsia Philippines over the weekend suspended flights to South Korea, the country’s biggest source of tourists.
Flights to China, the second largest source of tourists, and its special administration regions Hong Kong and Macau early last month, have been suspended since early February.
These flight suspensions could potentially cut by 10 percent the revenues of the airlines.
The estimate does not include the impact of the slowdown of bookings and the rising number of booking cancellations.
PAL said the travel restrictions and flight suspensions to areas affected by COVID-19 had aggravated the airline’s woes.
The flag carrier over the weekend announced it laid off 300 employees as part of its business restructuring to increase revenues and reduce costs and help strengthen the company in the wake of losses sustained in 2019.
PAL implemented a voluntary separation of long-serving employees and a retrenchment process.
The move, completed last February 28, resulted to the separation of about 300 ground-based administrative and management personnel.
Other initiatives of PAL include revenue generation from an optimized route network and new ancillary products, more aggressive cost-management efforts, and investment in digital technology.
PAL said it will continue to take delivery of additional aircraft for regional flights, and is gearing up to launch new Cebu-Los Angeles nonstop flights and routes to Perth, Pagadian City, Kota Kinabalu and Manado.
AirAsia Philippines meanwhile will likely defer its initial public offering (IPO) and will focus instead on the recovery of losses from the suspension of flights in China and South Korea.
“We haven’t touched it again (IPO). To us. the most important is to put focus on the domestic expansion,” said Ricky Isla, AirAsia Philippines chief executive officer.
Isla said the IPO is still part of the plan.
AirAsia reported a net profit of P1.87 billion in 2019, a turnaround from a P3.51-billion loss in 2018 driven by strong domestic and international passenger growth.
The airline reported a 25-percent passenger growth to 8.6 million passengers by end 2019 from 6.9 million the previous year.
“We were good last year, but we have to be a lot better this year,” Isla said when asked on the target for 2020.
Cebu Pacific have cancelled six flights between Manila to Incheon, and Kalibo to Incheon, South Korea.
Charo Logarta, Cebu Pacific spokesperson said suspension will shave the airline’s revenue by 2 percent.
The low-cost carrier flies 40 per week between the Philippines and South Korea.
This is on top of the 9 percent revenue loss from cancellation of flights in China and its SARs since last month.
Based on initial assessment of International Air Transport Association (IATA) the impact of the COVID-19 shows a potential 13 percent full-year loss of passenger demand for carriers in the Asia-Pacific region.
This translate into a $27.8 billion revenue loss in 2020 for carriers in th region–the bulk of which would be borne by carriers registered in China, with $12.8 billion lost in the China domestic market alone.
In the same scenario, carriers outside Asia-Pacific are forecast to bear a revenue loss of $1.5 billion, assuming the loss of demand is limited to markets linked to China.
This would bring total global lost revenue to $29.3 billion (5 percent lower passenger revenues compared to what IATA forecast in December) and represent a 4.7 percent hit to global demand.
