Airline REVENUES is expected to be “close to catastrophic” in the first half of the year, said the Asia-Pacific Aviation Think Tank Center (CAPA), as trunk routes will not be commercially viable.
“The revenue profile for airlines in the first half of 2021 looks almost catastrophic, given that they’ve been breathing for so many months,” CAPA said in an analysis posted on its official website on January 11.
Some airlines may see improvements in the second half of 2021, particularly “towards the end of the year, but with only a modest acceleration after the end of the first half,” he added.
So far, the Philippines has prohibited the entry of residents from 28 countries, including the United Kingdom, the United States, Japan, Germany and Canada, where the most infectious variant of coronavirus disease 2019 (COVID-19) has been detected.
The Presidential Palace announced on Tuesday that travel bans will be extended to residents from five other countries—China, Luxembourg, Oman, Pakistan, and Jamaica—from Wednesday (Jan. 13) to January 15.
CAPA Founder and Chairman Emeritus Peter Harbison was quoted in the analysis as saying that the current condition is best suited to low-cost carrier business models.
“They are usually best positioned to benefit from the recovery process after a major shock. And the recovery will be driven by domestic and international short-haul leisure markets,” said Mr. Harbison.
He also said that “the 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 roll-out on international aviation this year as “just a slideshow.”
“The implementation of vaccines will take many months, and we have already seen significant delays and clear indications of difficulties in the supply chain,” said the aviation think tank.
“Vaccination priority will be given to categories that are actually, in most cases, less likely to travel. The younger, healthier people will not receive vaccinations until later in 2021—that’s if they receive them at all in 2021,” he added.
Mr. Harbison believes that “government subsidies will be needed to maintain key international truck routes, at least in the short term, because they will be largely unworkable at least until 2022.”
Low-cost carriers Cebu Pacific and Philippines AirAsia have both launched an offer to boost domestic travel.
Philippine AirAsia announced on Monday that it has begun to see positive signs of domestic tourism.
In November last year, the Finance Department announced that it had informed Philippine Airlines (PAL) of its plans to seek court protection from its creditors.
The airline sector is indeed “under serious stress,” said Lance Y. Gokongwei, president and chief executive officer of Cebu Pacific’s listed operator Cebu Air, Inc. recently.
PAL Holdings, Inc., the listed PAL operator, saw a net loss of 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 had a net loss of P14.69 billion over the period January to September, from P6.77 billion of profit generated in the same period in 2019.