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Malaysia Airlines (MAS) has told lessors that it will not be able to make payments for planes after next month unless it receives more money from the Khazanah state sovereign wealth fund.
According to Reuters, MAS is burning US $ 84 million (S $ 114 million) in cash each month, but only had US $ 88 million of liquidity at the end of August, plus an additional US $ 139 million available from Khazanah, its sole shareholder.
Now, Khazanah has warned leasing companies that it will stop financing the airline group, while its chief executive, Izham Ismail, has warned that it would “have no choice but to shut it down” if the lessors decide not to support the restructuring plan.
MAS is not the only Asia Pacific airline in this situation.
Singapore Airlines, which is currently operating at less than 10 percent of capacity, is burning cash to the tune of nearly $ 300 million every month. Fortunately, the group has managed to raise $ 11 billion through a rights issue and guaranteed loans.
It has also tied up additional lines of credit and can raise an additional $ 6.2 billion in mandatory convertible bonds before next June. This is the highest amount of funds raised by any Asian operator group.
Since international borders remain closed, you will have to judiciously manage your cash.
In Hong Kong, Cathay Pacific, controlled by the 73-year-old Swire Group, which faced a 90% collapse in passenger numbers, has parked more than 40% of its planes and is postponing deliveries of larger planes while reflects on the move to a fleet of smaller aircraft with fewer business class seats.
Thai Airways, 48 percent owned by the Thai government, is in bankruptcy after defaulting
85 billion baht (S $ 3.7 billion) and facing 333 billion baht in liabilities.
Across the Asia-Pacific region, a similar sad story prevails. Regional airlines are struggling to survive amid a single pandemic in a century that has paralyzed international air travel.
Asia-Pacific international traffic is down 96% year-on-year. Capacity has plummeted 91% and the international load factor is just 35%. Most carriers operate at 10% of their capacity on international routes.
Much ink has been spilled recounting their losses and struggles.
While some airlines are backed by the government, these remain valuable taxpayer funds that can be reallocated elsewhere to save jobs and support livelihoods.
The International Air Transport Association (Iata), citing poor virus containment around the world, depressed business travel and a lack of consumer confidence, does not expect air travel to return to pre-Covid-19 levels in no time before 2024. Meanwhile, it projects that global airlines will collectively lose about $ 84.3 billion this year and another $ 15.8 billion next year.
Asia Pacific airlines face a loss of $ 29 billion this year.
Iata just warned that the global airline industry will collectively consume $ 77 billion in cash during the second half of this year (nearly $ 13 billion per month) and nearly $ 6 billion per month next year. .
The only positives have been countries with huge domestic travel markets, such as China, where a return to something close to normal has seen an increase in air travel between cities.
The country’s domestic passenger traffic is down just 19% year-on-year, while capacity on domestic routes is down just 6%, thanks in large part to the government’s ability to implement risk management procedures and control the pandemic. .
Some level of domestic air travel has also started to take off in Japan, Australia, New Zealand and Vietnam, while South Korean carriers, traditionally dependent on a high proportion of the cargo business, appear to be marginally profitable.
But as Mr. Subhas Menon, CEO of the Association of Asia Pacific Airlines (AAPA) points out, hopes that international air travel will gradually return in the second half of this year have proven premature.
“While there have been discussions about flyways, travel bubbles and green lanes, these have so far not taken off due to their impracticality and inability to scale to meet reasonable expectations of travelers,” he noted. “Progress is being made in testing, contact tracing, wearing masks and social distancing, measures that also apply in the context of international air travel. Unfortunately, their adoption is not consistent or coordinated between states.”
While the crisis has left most of the region’s carriers hanging by a figurative financial thread, forcing them to part ways with pilots, cabin crew and other personnel, the impact is also being felt in the broader economies of this region. of about 4.4 billion people.
This is because each job in aviation generates another 25 in the overall economy, whether in tourism, travel, retail or commerce.
The geographically vast Asia-Pacific relies on international air travel to support everything from trade and supply chains to tourism and basic connectivity.
Since this diverse region is separated by oceans, seas, mountains and other natural barriers, air travel has been instrumental in keeping it connected, with itself and with the rest of the world.
But the pandemic has closed borders and stifled travel.
“This crisis is not a product of aviation,” said AAPA’s Mr. Menon. “It is also not the only sector affected. However, more than six months after the pandemic, most international flights are still blocked by border closures, even as closures are gradually reduced. The economic consequences of the closures are widespread, with job losses inside and outside the industry. “
But it does not have to be like that.
Singapore, for example, has begun to unilaterally open its borders to selected low-risk countries such as Australia, New Zealand, Brunei and Vietnam.
But such measures have to be comprehensive and bilateral to really take off. For that to happen, governments must communicate with each other and devise a risk assessment protocol and testing regime acceptable across Asia and the Pacific to support the reopening of borders.
Perhaps they should take a sheet from the book of the European Center for Disease Prevention and Control, which has compiled a strategic database related to the pandemic in all member countries and has provided a risk assessment guide for airlines and travelers in the euro zone.
Similar databases and protocols are maintained and used by other public health organizations, such as the World Health Organization and the US Centers for Disease Control and Prevention.
Nobody wants to travel to another country to be quarantined for 14 days. That being said, evidence-based and scientifically supported testing regimes are the only way to gradually reopen borders in Asia and the Pacific.
For example, protocols may allow countries with similar risk levels to allow air travel between them, subject to testing 48 hours prior to departure by certified medical authorities at the point of departure. All of this would support accurate contact tracing and the appropriate Covid-19 healthcare infrastructure in each country.
If all the boxes are checked, countries should open their borders, at least bilaterally to begin with. A good example is the newly announced travel bubble between Singapore and Hong Kong.
Such a measure has been endorsed by Iata.
The airline’s global body has called for the development and deployment of rapid, accurate, affordable, easy-to-operate, scalable and systematic Covid-19 tests for all passengers prior to departure as an alternative to quarantine measures, in order to re-establish world-class air connectivity.
Iata said it would work through the International Civil Aviation Organization and with health authorities to implement this solution quickly.
The countries of Asia and the Pacific must go beyond statements of good faith and act together. Every day, every week, and every month of closed borders and planes on the ground further strain their economies and stress their people.
International isolation is not a sustainable policy for any state.
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