Asia Pacific Airlines continues to tighten border restrictions

The Association of Asia-Pacific Airlines (AAPA) said in its calendar year 2021 traffic results that international air travel remained at severely depressed levels, due to “the decimation of demand for international air passengers” for airlines in the region, as strict border restrictions are implemented in The response to the protracted Covid-19 pandemic has dashed hopes of a recovery in air travel markets.

“Overall, the 16.7 million international passengers carried in 2021 were only 4.4% of the volumes recorded in 2019, while the seating capacity offered averaged 13.8% of the levels recorded in 2019” , did he declare. “For the full year, the international passenger load factor was only 32%, underscoring the difficult conditions facing airlines in the region in the passenger sector.”

However, a 2022 Airline Economics-KPMG report said no Asia-Pacific-based airlines ceased operations in 2021, although airlines that filed for bankruptcy protection last year included Philippine Airlines and China’s HNA, the parent company of Hainan Airlines. Garuda Indonesia and Malaysia’s AirAsia X had opted for the restructuring.

Airline exits over the past 18 months have included NokScoot, the Thailand-only joint venture between Nok Air and Singapore Airlines, Air Asia Japan and Cathay Dragon.

Given the region’s governments’ response to the pandemic to curb passenger air traffic, Rob Morris, global head of consultancy Ascend by Cirium, told AIN he could not rule out further liquidations of airlines. Asia-Pacific airlines, especially among low-cost carriers, over the next few years. 12 to 24 months.

“While underlying demand dynamics in Asia-Pacific remain strong, continued government restrictions through 2022 should continue to drive a slower recovery in the region than what we have seen in North and South America. South and in Europe,” he said. “In particular, the continued restriction of international travel to and from China, a market on which much of the rest of the region relies, could continue to pose traffic and revenue challenges for airlines in the region. .”

By contrast, most domestic markets showed a strengthening recovery, raising the potential for further restructuring or downsizing of airlines in the region and possible market exits through liquidation.

“However, given the severity of the pandemic in the region, the number of airline failures to date has been remarkably low and we expect this to continue over the next 12-24 months as airlines restructure. instead, sometimes through a process of bankruptcy, to emerge as more efficient and leaner companies, better suited to the current dynamics of market demand, but with the potential to grow again as the demand growth picks up after the pandemic,” Morris said.

Siva Subramaniam, partner and aircraft finance and leasing specialist at Singapore-based law firm Herbert Smith Freehills, said AIN many airlines in the Asia-Pacific region continued to struggle.

“In December, Philippine Airlines released what’s called a pre-packaged Chapter 11,” he said. “They have now started to pay under the restructured agreements they have reached with their creditors. Garuda Indonesia was initially looking at Chapter 11; now they are looking at other ideas on how they can restructure: they are in a local [suspension of debt payment obligation (PKPU)] process right now.

Lion Air is facing insolvency proceedings in France, he continued. “All the major airlines in Thailand had government money,” he said. “Thai Airways is in local bankruptcy proceedings. Unless you have government money like Singapore Airlines or Cathay, you won’t survive this kind of shock without having some sort of deferral or restructuring. You’re just bleeding too much money.

While Australia and New Zealand have fared relatively well during Covid, their airlines have lost a lot of money due to a lack of international travel. “Domestic travel in Australia before Omicron was doing well; now, obviously, it’s been broken because cases have increased and there have been border closures between Australian states, which then impacted domestic travel. A number of these airlines were convinced to resume international travel,” he said. “These projections had to be removed.”

Subramaniam hailed the efforts of entrepreneur Tony Fernandez to establish the Malaysia-based Air Asia franchise, which operates 255 aircraft across its domestic fleet and those of current subsidiaries.

“You’ve seen how low-cost carriers have worked in Europe and how well WizzAir, Ryanair and EasyJet have done there,” he said. “The complication for Fernandez in Asia is the regulatory environment. Setting up low-cost carriers in all these jurisdictions requires you to own or create a joint venture with a local partner, create another airline, get a another AOC; all this increases costs, even if it is under the same brand, it is more difficult to do than for Ryanair and EasyJet.

India, meanwhile, saw a number of air casualties. “Kingfisher was the biggest; other airlines are in big trouble,” Subramaniam said. “Go Air is trying to make an initial public offering. It’s a tough market. There is a lack of infrastructure in terms of airport capacity. There is not enough GDP for many people to travel. »