Braced for Headwinds
Aviation industry grapples with novel coronavirus fallout
At dawn on March 17, Jiang Jia tenderly kissed her sleeping son goodbye and headed out the door quietly. She was flying out from southeast China on a special mission to Wuhan in Hubei Province in central China and wouldn’t see him again for 14 days at least.
The day before, a leading group of China’s novel coronavirus disease (COVID-19) response announced a phased withdrawal of medical workers from Hubei, a sign that the epidemic had been brought under control in the hardest-hit region.
As the crew chief of MF8765, a charter flight of Xiamen Airlines, Jiang’s mission was to escort 138 doctors and nurses in Wuhan back to their home city Tianjin near Beijing. The 1 p.m. flight on March 17 was the first of the 21 charter flights taking off from Hubei with the same mission. The day ended with 3,738 medical workers from all over China, who were sent to Hubei to assist the local doctors, finally returning home. They were the first 49 medical teams to do so.
Jiang and her team considered it an honor to witness the memorable moment. “We sent batches of medical workers to Wuhan during the outbreak and told them we would take them home when the epidemic ended,” she said. “Finally, that day arrived.”
Aerial artery
While medical personnel played a frontline role in bringing the outbreak under control, people like Jiang were also an essential part of the efforts. They ensured the smooth operation of civil aviation, an indispensable aerial artery for both epidemic control and resumption of work by companies.
According to the C i v i l Aviation Administration of China (CAAC), as of March 16, more than 26,900 flights had been run to transport over 34,000 tons of epidemic prevention and control supplies, and 428 flight missions had been organized to transport 37,700 passengers, including 33,800 medical workers. They also brought back home more than 2,400 tourists from Hubei who had been stranded overseas.
The sector has played a considerable role in the resumption of production as well. Gong Tiancai, an employee with the China Construction Fourth Engineering Division Corp., flew back to work in the coastal city of Xiamen in the southeast from Guiyang in the southwest.
“We did not have to pay for the ticket,” he told China Central Television. The flight, booked by the Xiamen Federation of Trade Union, carried 172 passengers who work for different companies in Xiamen back to their workplaces.
“The flight [Gong took] was paid for by both the government and the companies,” Chen Rong, a marketing committee official at Xiamen Airlines, said.
By February 21, 20 airlines were running charter flight services to assist companies recommence work. The fare they charged was at cost, or one third of the normal price.
A bleak winter
While the industry has been one of the biggest contributors to anti-epidemic efforts, it is also among the biggest sufferers.
“The epidemic has increased our difficulties. Flights have to be adjusted frequently,
making the work as hard as facing a typhoon every day,” Ju Zhiguo, Director of Department of Airline Operation, Xiamen Airlines, said. Ju has been working till almost midnight every day since the outbreak and canceled his holiday.
A greater blow has been the cancellation of flights. While business has come to a standstill, there are still large-scale refunds to be made for tickets, which has hugely impacted the cash flow of the asset- and capital-intensive industry.
According to CAAC, the aviation industry registered losses of 24.59 billion yuan ($3.53 billion) in February. Total air transport turnover tumbled 73.9 percent year on year to 2.52 billion tons-km and the passenger throughput stood at 8.34 million trips, plummeting 84.5 percent from the same period last year.
Not only in China, the global aviation industry is facing its coldest winter in the wake of the pandemic. According to a statement issued by the International Air Transport Association (IATA) on March 5, the global airline passenger business is set to lose $63 billion to $113 billion because of the outbreak.
“In a little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse,” Alexandre de Juniac, Director General and CEO of the IATA, said in the statement.
The Republic of Korea’s flag carrier Korean Air reduced its global capacity by 80 percent, UK airline Flybe announced its collapse while British Airways warned its employees through an e-mail that its survival was at stake.
To compound the gloom, the U.S. added the UK and Ireland on its travel ban list. Everywhere now, governments and companies are tightening travel policies, dealing a hard blow to the global aviation industry.
De Juniac suggested stimulus measures including “relief on taxes, charges and [airport] slot allocation.” If governments cannot address the problems properly, the whole industry will face a financial crisis, he warned.
Finding solutions
The Chinese Government has been rolling out measures to help the industry tide over the difficulties. On March 12, CAAC announced 16 new measures, including increasing infrastructure investment and cutting corporate costs.
Airlines will be temporarily exempt from contributing to the civil aviation development fund, consisting of airport taxes paid by passengers, and other fees by airlines and aviation enterprises, while financial support will be given to international air transport and key flight missions for disease control. The fund will subsidize companies to invest in fixed assets for epidemic control.
Aviation companies are also strategizing on their own. Xiamen Airlines told Beijing Review that to remain profitable and promote development, it is cutting costs, seeking digital transformation and optimizing core resource allocation. In addition, it is requesting government subsidies, having applied for 417 million yuan ($59.4 million).
With the outbreak coming under control in China and business operations nationwide resuming in an orderly manner, domestic passenger trips rose by 16 percent in the March 2-8 period compared with the same period last month. About 40 percent of the normal flight capability has been resumed, Jin Junhao, an official with CAAC’S transport department, said on March 12.
Airports in the industrialized cities of Shenzhen, Chengdu and Chongqing have resumed over 60 percent of their normal capacity. By March 11, construction on more than 50 percent of 81 airport projects had resumed and by early April, it is expected to rise to 86 percent, Jin added.
On March 6, Premier Li Keqiang inspected the Beijing Capital International Airport (BCIA), where he said COVID-19 was a common challenge for the international community. Cooperation with international organizations, relevant countries and regions, especially in the field of air transportation, should be strengthened to contain the disease.
He also inspected the aviation distribution center of SF Holding, a courier giant, where he emphasized the importance of striving for smooth logistics to advance economic and social progress.
CAAC is classifying flights as facing high, mid and low risk according to the epidemic situation of the departure countries, the passenger load and the conditions of the flights and taking safety measures accordingly, Zhu Tao, an official with CAAC, told a press conference on March 16.
The BCIA has designated a special zone for all international flights as well as flights from Hong Kong and Macao special administrative regions and Taiwan where passengers have to undergo a health check for COVID-19 symptoms.
Zhao Ying, Vice President of BCIA, said at a press conference that since March 13, all international inbound flights of the Beijing Daxing International Airport have been transferred to the BCIA.
Airline companies are also implementing their own measures. Xiamen Airlines started conducting health checks on international passengers on January 27 and about a month later, added more measures like upgrading the safety equipment onboard and strengthening management of its employees overseas.
While domestic airlines are resuming operation, however, it remains uncertain when the international airlines that have suspended flights will follow suit.
The recent slump in crude oil prices was expected to bring some cheer to the industry as oil accounts for 30-35 percent of airlines’ costs. But analysts said there will be no shortterm benefits for them as there is a time gap for crude oil to be processed into aviation oil.
Minsheng Securities, a security brokerage, has estimated that while the large airlines will rebound, the small and medium-sized ones can collapse. This year will see further industrial integration and concentration of market shares, which will benefit the large airlines.