Aviation sector looking for bailouts, hit by coronavirus

By Shahid Hussain

The aviation sector is undergoing unprecedented turmoil since the outbreak of the novel coronavirus. The first mayday signal was witnessed during Chinese Lunar New Year which recorded a 71 percent drop in the number of passengers from a year before.

With the pandemic affecting almost every part of the world, the authorities have either fully suspended flights or reduced capacities drastically.

The International Air Transport Association (IATA) has slashed its revenue forecast to 44 percent which means a loss of $252 billion as compared to last year. Thousands have already lost their livelihood and others are receiving revised salaries, the ripple effects are more severe for contractor companies like catering and tickets vendors as they do not have a financial cushion to cope with this crisis situation.

Manufacturing industries which assemble aircraft are halting their operations, not only because of the sharp fall in demand, but also because of the lockdown itself. To add to the woe, airlines are struggling to idle their fleets. They have to rent space from military bases due a lack of landing strips, hangars and runways.

Countries where the aviation sector contributes significantly to gross domestic product are worse hit as they are facing the double onslaught of the pandemic and are in dire need of bailouts. The U.S. Senate is taking the lead by unanimously approving a $58 billion aid program for the American aviation industry so as to safeguard about 750, 000 employees whose livelihood is badly hit.

The Middle East is set to suffer a loss of $7 billion and a loss of about 350,000 jobs, the United Arab Emirates (UAE) and Saudi Arabia are worst hit in the region. However, they are rich and the airlines are state-owned; so damage to the employees will be minimal.

In Asia, Singapore Airlines is waiting for government aid as it has cut 96 percent capacity and has implemented cost cutting measures for its staff of about 10,000.

South Korean airlines are set to lose $4.2 billion by June. The Korea Civil Aviation Association reported a sharp drop of 65.8 percent in the number of passengers on international routes in February. After announcing that the 2020 Tokyo Summer Olympics was postponed until 2021, Japanese airlines said they will cut 64 percent of their international flights due to declining travel demand.

The Indian aviation sector which was spreading its wings in every part of the country in recent years is set to record an estimated loss of $3.3-3.6 billion in the second quarter.

With more than 155,807 active cases and about 13,000 fatalities Italy, Spain and France, which were otherwise tourist destinations receiving millions from across the globe, have become hotbeds of the pandemic. Due to the outbreak, not only these three countries but all of Europe is locking down, which has crippled the aviation sector that is demanding relief from environmental taxes, and a swift bailout.

Even in this darkest hour cargo flights have become a lifeline to countries which are dependent on external help for medical and food supplies.

The medical professional who are fighting this pandemic are true heroes. But we also have to appreciate the sacrifices of unsung heroes like pilots and cabin crew of airplanes who flew to the epicenter of the viral outbreak to evacuate citizens of their respective countries, and cargo plane staff who are working tirelessly to deliver essentials goods.

No doubt the coming days will be very difficult for the whole world, and the aviation sector might bear the brunt of the worsening pandemic crisis which will affect millions of people who are directly or indirectly working in this industry.

It is now necessary for the authorities to bailout the aviation sector by providing financial aid to workers who are losing their jobs and cannot find employment because of the lockdowns, shutdowns and the declining economy.

Shahid Hussain (hussain.shahid@greenproposition.com) is CEO and founder of a consultancy company based in the UAE and writes about matters which shapes trade and business in Asian markets.

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