Will Omicron derail airline recovery in South and Southeast Asia?

By Lee Kah Whye |
January 24, 2022 08:51 IS

Singapore, Jan. 24 (ANI): Singapore Airlines (SIA), co-owner of Gurgaon-based Vistara airlines, in reporting its latest operational data revealed it carried 600,000 passengers in December, nearly double the number. passengers per month ago. This is ten times higher compared to the 64,600 it carried in December 2020, and an indication that the region’s battered aviation industry is beginning to recover from the COVID-19 pandemic.
The higher number is also partly due to the year-end holiday season in Singapore and the success of the vaccinated travel lane (VTL) itinerary the city-state has introduced.
As of November 26 last year, a total of 24 countries, including India, Sri Lanka and the Maldives, are under the Singapore VTL program. Visitors from Qatar, Saudi Arabia and the United Arab Emirates (UAE) were to be added as VTL countries from December 6, but this arrangement was halted due to the emergence of the highly mutated and more transmissible Omicron COVID variant. Since then, no other country has been added.
Partly because of the Omicron variant, the Singaporean authorities announced on December 22 that they will pause the sale of VTL air tickets until January 20 and half the quota for visitor arrivals under the VTL scheme. Earlier, it had set a daily limit of 10,000 travelers from VTL countries allowed to enter Singapore.
SIA has acknowledged this quota reduction in its statement accompanying the publication of its December 2021 business statistics. The carrier said it will “remain nimble and continue to manage its network in accordance with prevailing market conditions and regulations.” It also added that it expects passenger capacity for January and February 2022 to be approximately 47 percent and 45 percent of pre-COVID levels, respectively.
This, of course, assumes that its customers do not cancel or change their plans due to travel inconveniences, as some countries impose stricter border controls, including more testing and quarantines. If SIA succeeds in meeting the expected passenger numbers for this month and next, the airline will continue to improve its performance.
At the end of December 2021, SIA’s passenger network covered 85 destinations, including Singapore, 13 more than at the end of last month.
While SIA is still losing money, albeit at a slower rate than during the height of the pandemic-forced border closures, SIA is certainly in a better financial position than its regional counterparts.
Backed by Singaporean public investment firm Temasek, it managed to raise more than $16 billion since the start of the pandemic and sold another $600 million worth of bonds last week at a very attractive yield of 3.493 percent, nearly one percentage point lower than the previous week. average yield at issuance for global notes sold in 2021, according to data from Bloomberg.
Many regional airlines that do not have such government support are just out of bankruptcy court or are still in the middle of such proceedings.
On the last day of 2021, Philippine Airlines has said it has come out of bankruptcy after a US court approved its plan to reduce up to $2 billion in debt. It also obtained USD505 million in additional capital from its main shareholder, billionaire Lucio Tan through its investment holding companies.
Indonesia’s Garuda is still in the midst of a court-mandated restructuring. Just last week, an Indonesian court extended the period for Garuda’s debt restructuring by 60 days to give the airline more time to verify all claims. It is asking creditors for a $6.1 billion haircut to reduce debt to $3.7 billion under a court-led process.
Thai Airways is currently run by bankruptcy managers since filing for protection in May 2020 after spectacularly defaulting on more than $3 billion in debt. The airline was in debt of $9.8 billion at the height of the COVID pandemic. It seeks to reduce its day-to-day operating costs and expenses, reduce its operations, increase its revenues and seek new sources of financing.
Air India, after wasting $3 million a day in taxpayers’ money for most of the past decade, was finally transferred to Tata Sons and the transfer was expected to be completed by the end of January. The steel-to-salt conglomerate paid approximately $2.4 billion to acquire the government-owned airline, including the assumption of $2 billion in debt.
AirAsia, which has managed to stay afloat by cutting costs, raising funds, divesting assets and rescheduling payments to its creditors, has also explored several ways to diversify its revenue stream. They now have a “super app” and deal with taxiing, food delivery, online shopping and digital payments. It has also strengthened its logistics capabilities and entered the market to purchase more cargo aircraft. It sold its stake in AirAsia India to raise capital and now owns about 16 percent of the airline, less than its pre-pandemic 49 percent stake.
AirAsia CEO Tony Fernandes recently told CNBC that he believes the air traffic recovery has started in earnest despite Omicron.
“The good thing is we had no planes at this time last year. Now we have a large part of our fleet flying in Malaysia, Thailand and Indonesia,” he said, adding that demand is “very, very robust.”
In a press release published on Jan. 12, the International Air Transport Association (IATA) reported that aggregate demand for air travel in November 2021, measured in passenger-mile sales for November 2021, improved compared to the previous month. It was 47 percent lower than in November 2019, 1.9 percentage points higher than the 48.9 percent figure in October 2021 compared to October 2019.
While the association noted that air traffic continued to recover in November, this was before the Omicron wave, which prompted some governments to reintroduce border restrictions only after its lifting a few months earlier.
Willie Walsh, IATA’s director general, believes governments have overreacted to the rise of the Omicron variant by resorting to “tried methods of border closures, excessive testing of travelers and quarantine to slow the spread”.
“Not surprisingly, international ticket sales fell sharply in December and early January compared to 2019, suggesting the first quarter was more difficult than expected,” Walsh said. ‚ÄúThere is little to no correlation between the introduction of travel restrictions and the prevention of cross-border transmission of the virus. And these measures place a heavy burden on lives and livelihoods. If experience is the best teacher, let’s hope that governments pay more attention to as we start the new year.” (ANI)


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