The health of global airlines – including those in the Asia Pacific – is being given close scrutiny by industry experts who believe there will be winners and losers coming out of the Covid pandemic.
The winners will be those airlines whose strong domestic business will offset the financial impact on the suspension of international services.
Case in point: Kazakhstan’s Air Astana Group has returned to profit in first half 2021. President & CEO Peter Foster said, “Strong market growth and a preference for air travel over long rail journeys have transformed Kazakhstan into the world’s fastest growing domestic market.”
The Kazakh group’s two brands, Air Astana and LCC FlyArystan, have both performed well on domestic routes, Foster said.
Qantas has also been successful in returning its domestic operations to near pre-Covid levels, despite frequent state border closures disrupting operations.
Also on the winners’ podium will be low-cost carriers who went into the pandemic with little red ink on their balance sheets and are poised to capture pent-up demand for cheap short-haul international travel once border restrictions are eased.
On the flip side, losers will be airlines that rely on long-haul routes, and business travel, which is expected to lag leisure travel once Covid is conquered.
A high number of respondents to an April 2021 survey by travel services company Collinson and CAPA Centre for Aviation believe that leisure travel would recover significantly faster than business travel, while in both categories, shorter-haul flights will make a faster comeback.
When asked by Collinson to select the most plausible scenario in 2022 for the recovery of leisure travel, 27% of respondents in Asia say they expect 41-60% of 2019 levels next year.
“The airspace between losers and the industry’s winners is widening,” according to The Economist.
John Grant, chief analyst at OAG, said that carriers like Singapore Airlines that went into the pandemic with strong balance sheets will need to “rely on the whole world reopening” to get back to full operations. And that will not happen, he said, until much more of the globe is vaccinated.
New York-based analyst Bernstein said the biggest issues facing Asia Pacific carriers were sluggish cross-border traffic and low vaccination penetration in many countries.
Bernstein has warned that high debt levels could also hamper Asia Pacific airlines looking to modernise their fleet and add passenger capacity. He favours American and state-supported Chinese airlines to lead the recovery from Covid and become cash positive.