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KUALA LUMPUR: The sight of planes on the ground and parked globally in March this year due to travel restrictions and border closures imposed to control the spread of the new coronavirus was only the beginning of the serious consequences that awaited the sector to throughout 2020.
Demand for air continued to plummet thereafter as countries were hit by the second, third and fourth waves of Covid-19 infections, making it difficult for air travel to get back on track.
Revenue flows eventually came to a standstill, the workforce ceased, airports closed, the delivery of new aircraft was postponed, and aircraft production came to a halt.
Even when some sectors and industries have started to see green shoots or have made a full recovery, the aviation industry does not appear to be so lucky, at least until 2024.
It is not the first crisis, but definitely the worst
The world of aviation has survived several shocking events: the terrorist attacks of September 11, the SARS outbreak of 2003, the financial crises of 1997/98 and 2007/08, and global recessions; but nothing comes close to what COVID-19 has done.
According to the International Air Transport Association (IATA), global carriers would lose $ 84.3 billion ($ 1 = 4.07 yuan) this year, making it the worst year in aviation history, and air traffic was not it will fully recover until 2024.
Closer to home, Transport Minister Datuk Seri Wee Ka Siong told Parliament on July 21 that the Malaysian aviation industry is expected to lose RM13 billion this year, including a RM10.9 billion loss. of local airlines: Malaysia Airlines Bhd (MAB), AirAsia Group Bhd and Malindo Airways Sdn Bhd.
Airport operators Malaysia Airports Holdings Bhd (MAHB) and Senai Airport Terminal Services Sdn Bhd could lose a total of 2.1 billion ringgit this year, it said.
Endau Analytics aviation analyst Shukor Yusof said that 2020 would be seen as the ‘annus horribilis’.
Compared to 2014, when the local industry experienced two major catastrophes involving Malaysia Airlines’ MH370 and MH17 in addition to AirAsia Indonesia’s QZ850, the situation was different then and now, but “in history, this is the worst! ” he said.
The Malaysian Aviation Commission (MAVCOM) expects passenger traffic this year to contract between 72.8% and 75.7% year-on-year (year-on-year) to between 26.6 million and 29.7 million passengers.
He said local passenger traffic fell to its lowest level in Malaysian aviation history, registering just 802,525 passengers in the second quarter, down 97.0 percent from 26.7 million passengers in the same quarter last year.
In the first half of 2020 (1H20), applications for air traffic rights (ATR) fell substantially by 55.6% year-on-year compared to the same period in 2019.
Border restrictions
COVID-19 spread exponentially faster than SARS and travel today has made the world much more interconnected than it was in 2003, leaving civil aviation authorities with no choice but to impose travel restrictions and the closure of international borders.
The government has implemented the Movement Control Order (MCO) since March 18 and commercial airlines significantly reduce their overall network, starting with routes connecting China.
The operations were limited to domestic services and rescue flights with Wisma Putra repatriating Malaysians stranded abroad, as well as humanitarian services sending home foreign nationals who were stranded in the country.
Airlines had to make last-minute cancellations to comply with restrictions, with some redirecting passengers through reassignment to other airlines, creating additional cost for their operations.
In the first half of the year, a total of 169,728 domestic and international flights involving three national airlines were canceled, namely MAB, AirAsia and Malindo, affecting 4,316 million passengers.
To address this situation, passengers were offered ticket reimbursement, travel coupons, unlimited flexibility in changing travel date, exemption from certain fees, and many more.
MAVCOM recorded some 2,340 cases of consumer ticket reimbursement in 1H20 due to flight cancellation resulting from Covid-19, of the total, 2,146 were for reimbursement requests and the remainder for changes in flight dates.
Charge on demand
Despite a large contraction in the passenger load factor, cargo movements, on the other hand, were experiencing healthy growth with the transport of medical equipment such as disposable masks, rubber gloves, and protective suits, which mostly they were made in Asia.
Increasing e-commerce, food, and other perishable items also contributed to overall demand.
Some airlines removed passenger seats from planes to convert them into instant freighters in order to catch up with the sudden increase in demand for cargo.
Freight operators MASkargo and Teleport had to change their freight schedules to manage high priority freight movements and work around the clock to ensure that shipments, especially medical supplies, arrive safely at their respective destinations.
Teleport posted positive earnings before interest, taxes, depreciation and amortization (EBITDA) of RM20 million for the third quarter ended September 30, 2020 despite a decrease in revenue from affected cargo capacity.
Large downsizing and restructuring
The adverse effects of the COVID-19 pandemic on the aviation industry have caused many airlines to turn to massive reduction measures, including lower operating costs, pay cuts across the board, layoffs, debt and corporate restructuring and even the closure of subsidiaries.
AirAsia had laid off 10 percent of its 24,000 employees to ensure their survival, Malindo Airways terminated the services of 2,200 employees, while Malaysia Aviation Group (MAG) offered an early retirement plan to employees, including those of MAB and Firefly.
On October 6, the MAB announced an urgent restructuring of a huge debt worth RM16 billion and approached creditors to negotiate, as the government would no longer be pumping cash or capital through its sole shareholder, Khazanah Nasional. Bhd.
If the negotiations fail, MAB would be forced to go into liquidation and MAG could consider executing an alternative plan to make Firefly Malaysia’s new national airline.
As for AirAsia X, the long-haul carrier has proposed a debt restructuring plan to reconstitute the US $ 15.3 billion of unsecured debt into a principal amount of US $ 48 million (RM200 million) and forfeit the rest.
Due to insolvency caused by the social consequences of the COVID-19 pandemic, AirAsia closed its operations in Japan after AirAsia Japan Co Ltd (AAJ), a 33% subsidiary of the airline group, filed for bankruptcy before the Court of Tokyo district.
More than 23,000 flyers were left without refund.
Survival mode in vaccine prospects
Airlines were bleeding significantly and many were in survival mode, as cash flow dried up faster than expected and remained afloat until the flight restriction was lifted.
MAHB posted a net loss of RM 431.17 million in the nine months ended September 30, 2020 (9M20) compared to a net profit of RM 507.53 million in the same period last year, while revenue they were reduced to 1.6 billion ringgit from 3.87 ringgit. billion previously.
AirAsia Group Bhd posted a net loss of RM2.66 billion in 9M20 versus a net profit of RM80.72 million, while revenue fell to RM2.89 billion from RM9.09 billion.
Meanwhile, the net loss of its sister company AirAsia X widened to RM1.16 billion during the same period from RM393.67 million previously.
Despite the fact that many industries have started to walk on the road to recovery following the easing of the MCO, the aviation industry is still in limbo as to when it can “fully operate”, given that the domestic market does not it was enough to fill an empty stomach.
The positive development of Covid-19 vaccines, especially those made by Pfizer and BioNTech, has raised hope for a faster recovery in passenger air travel with the reopening of international borders.
Airlines and cargo operators have declared their willingness and commitment to prioritize cargo capacity to transport Covid-19 vaccines when available.Called
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