Local airlines to lose $3.5 billion as flights grounded

MANILA, Philippines — The turbulence in the aviation industry due to the coronavirus disease 2019 pandemic is expected to translate to over $3 billion in potential gross domestic product (GDP) loss and more than 400,000 job cuts.

According to the International Air Transport Association (IATA), passenger demand in the Philippines is seen to decline by 36 percent this year, resulting in a revenue loss of $3.51 billion.

This would translate to a potential $3.75 billion in lost GDP and some 419,800 job losses, IATA said.

IATA said the potential losses and impact are based on a scenario where severe restrictions on travel are lifted after three months followed by gradual recovery.

“Based on a scenario in which severe travel restrictions last for three months, the Asia Pacific region as a whole will see passenger demand reduced by 37 percent this year, with a revenue loss of $88 billion,” IATA Asia Pacific regional vice president Conrad Clifford said.

In terms of passenger demand reduction this year, IATA said the Philippines, along with Cambodia and Vietnam, would be on the lower end of the range, while Thailand, Pakistan, Korea, and Sri Lanka would see the largest impact.

“While each country will see varying impact on passenger demand, the net result is the same – their airlines are fighting for survival, they are facing a liquidity crisis, and they will need financial relief urgently to sustain their businesses through this volatile situation,” Clifford said.

IATA has reiterated its call to Asia Pacific states to take urgent action in providing financial support to their airline industry which was hit by the COVID-19 crisis.

Australia, New Zealand, and Singapore have announced a substantial package of measures to support their aviation industry.

“But others in the region, including India, Indonesia, Japan, Malaysia, the Philippines, Republic of Korea, Sri Lanka and Thailand, have yet to take decisive and effective action. Jobs as well as the GDP supported by the industry are at risk,” Clifford said.

Clifford said governments need to ensure that airlines have sufficient cash flow to help them during this period through direct financial support, facilitating loans, loan guarantees, and support for the corporate bond market.

Taxes, levies, and airport and aeronautical charges for the industry are likewise requested to be fully or partially waived.

“It is critical that these countries still have a viable aviation sector to support the economic recovery, connect manufacturing hubs and support tourism when the COVID-19 crisis is over. They need to act now – and urgently - before it is too late,” Clifford said.

The Air Carriers Association of the Philippines (ACAP) has requested for assistance for the airline industry in the form of relief on current working capital credit lines, emergency lines of credit for six months, longer term facility, and waiver of all navigational and airport charges.

Philippine Airlines, Cebu Pacific, AirAsia Philippines, PAL Express, and Cebgo are currently “facing an existential threat to their survival” and as such, are in urgent need for government intervention to mitigate the impact of the COVID-19 pandemic in their operations.

Without relief, it said the industry’s cash position could deteriorate by $61 billion in the second quarter.