IATA: COVID-19 Cuts Demand and Revenues

The International Air Transport Association (IATA) announced that its initial assessment of the impact of the Novel Coronavirus 2019 outbreak (COVID-19) shows a potential 13% full-year loss of passenger demand for carriers in the Asia-Pacific region. Considering that growth for the region’s airlines was forecast to be 4.8%, the net impact will be an 8.2% full-year contraction compared to 2019 demand levels.

In this scenario, that would translate into a $27.8 billion revenue loss in 2020 for carriers in the Asia-Pacific region—the bulk of which would be borne by carriers registered in China, with $12.8 billion lost in the China domestic market alone.

In the same scenario, carriers outside Asia-Pacific are forecast to bear a revenue loss of $1.5 billion, assuming the loss of demand is limited to markets linked to China.

This would bring total global lost revenue to $29.3 billion (5% lower passenger revenues compared to what IATA forecast in December) and represent a 4.7% hit to global demand.

In December, IATA forecast global RPK growth of 4.1%, so this loss would more than eliminate expected growth this year, resulting in a 0.6% global contraction in passenger demand for 2020.

These estimates are based on a scenario where COVID-19 has a similar V-shaped impact on demand as was experienced during SARS. That was characterized by a six-month period with a sharp decline followed by an equally quick recovery. In 2003, SARS was responsible for the 5.1% fall in the RPKs carried by Asia-Pacific airlines.

The estimated impact of the COVID-19 outbreak also assumes that the center of the public health emergency remains in China. If it spreads more widely to Asia-Pacific markets then impacts on airlines from other regions would be larger.

It is premature to estimate what this revenue loss will mean for global profitability. We don’t yet know exactly how the outbreak will develop and whether it will follow the same profile as SARS or not. Governments will use fiscal and monetary policy to try to offset the adverse economic impacts. Some relief may be seen in lower fuel prices for some airlines, depending on how fuel costs have been hedged.

“These are challenging times for the global air transport industry. Stopping the spread of the virus is the top priority. Airlines are following the guidance of the World Health Organization (WHO) and other public health authorities to keep passengers safe, the world connected, and the virus contained. The sharp downturn in demand as a result of COVID-19 will have a financial impact on airlines—severe for those particularly exposed to the China market. We estimate that global traffic will be reduced by 4.7% by the virus, which could more than offset the growth we previously forecast and cause the first overall decline in demand since the Global Financial Crisis of 2008-09. And that scenario would translate into lost passenger revenues of $29.3 billion. Airlines are making difficult decisions to cut capacity and in some cases routes. Lower fuel costs will help offset some of the lost revenue. This will be a very tough year for airlines,” said Alexandre de Juniac, IATA’s Director General and CEO.

Role of Governments

Governments have an important role to play in this crisis:
Operations: Airlines have developed standards and best practices linked to the International Health Regulations (IHR) to manage effectively and efficiently in times of public health emergencies. Airlines, therefore, depend on governments to also follow the IHR so we have an effective global approach to containing the outbreak. “We have learned a lot from previous outbreaks. And that is reflected in the IHR. Governments need to follow it consistently,” said de Juniac.

Leadership: It is also important for governments to take leadership in shoring up their economies. The Singapore government, for example, is allocating SGD 112 million to provide financial relief to airlines struggling to economically maintain connectivity. “Airlines and governments are in this together. We have a public health emergency, and we must try everything to keep it from becoming an economic crisis. Relief on airport costs will help maintain vital air connectivity. Other governments should take good note and act quickly,” said de Juniac.


Advice to Travelers

The WHO has not called for restrictions on travel or trade. Indeed, air transport plays a major role—bringing medical staff and supplies to where they are needed.

WHO has published extensive advice to travelers on its website. Passengers should be reassured that cabin air is filtered, that aircraft are cleaned in line with global standards, that key airports have implemented temperature screening for travelers and that airline staff and crew are trained to deal with the rare case of a passenger presenting with symptoms of infection.

“If you are sick, don’t travel. If you have flu-like symptoms, wear a mask and see a doctor. And when you travel wash your hands frequently and don’t touch your face. Observing these simple measures should keep flying safe for all,” said Dr. David Powell, IATA’s Medical Advisor.






 
 

NAMA COMMISSIONS CAT3 ILS IN LAGOS, ABUJA

The Nigerian Airspace Management Agency (NAMA) has successfully commissioned its newly installed Category 3 Instrument Landing System (ILS) at Runway 18 Right, Murtala Mohammed International Airport, Lagos as well as Runway 22 at the Nnamdi Azikiwe International Airport, Abuja. 

In the same vein, a flight commissioning of the newly installed DVOR (Doppler Very High Frequency Omni-Directional Radio Range) in Lagos has successfully been carried out while routine flight calibration has also been carried out on Runway 18 Left in Lagos.

Making this disclosure in a statement, the Managing Director of NAMA, Capt. Fola Akinkuotu said a NOTAM (Notice to Airmen) to this effect has been disseminated accordingly while calibration of navigational aids in other locations across the country is in progress to ensure all navigational aids in Nigeria that are due for calibration are covered.

According to the NAMA boss, “in spite of initial hitches, it is gratifying to note that Runway 18R in Lagos has been certified for CAT 3 just as Runway 22 in Abuja with the newly acquired calibration aircraft by the Aviation Ministry. Both facilities are now fully operational.” 

While pledging a timely calibration of navigational facilities going forward, Akinkuotu said the availability of our flight calibration aircraft will ensure that NAMA is able to carry out calibration as and when due.

                                                                 

 

 

 

 

 

 

 

 

 

NIMET ACQUIRES COMPONENTS FOR DOPPLER WEATHER RADAR TO ENSURE NEAR TOTAL COVERAGE OF THE COUNTRY BY JUNE, 2020.HER

The Nigerian Meteorological Agency (NiMET) has acquired new radar components for the Doppler weather radar system, which will further enhance safety in the Nigerian airspace.

The agency also said that it intends to ensure 80 per cent total coverage of the country by June this year with the installation of the new components.

Speaking with aviation journalists in Lagos during the week, Prof. Sani Mashi, the Director-General, NiMET, said that the contract for the new components costs the agency about N400m to acquire.

He explained that when the entire project was awarded in 2007, it cost the country about N2.7bn, while with the installation of the radar components, the Federal Government would have spent additional N100m more, but regretted that the sum had climbed to N400m by 2019.

He explained that NiMET was able to get special allocation from the Bilateral Air Services Agreement (BASA) arrangement through the intervention of Sen. Hadi Sirika, the Minister of Aviation to fund the project.

Mashi hinted that the components for the radar system were delivered last week and ferried to their different locations for installations.

According to him, the components would be installed in Ikeja (Lagos Airport) and Kano Airport, stressing that as soon as the installation was done, the American company awarded the contract would then mount the radar on it.

He said: “When the contract was designed in 2007, there was a designed problem. The radar was supposed to be mounted on top of a tower. At Kano and Lagos locations, there were towers that were erected in 1974. So, the contract was designed in such a way that rather than constructing a new tower, those old towers of 1974 would be used so to save more money. That was how the project was under-designed.

“So, when I took over, I discovered the project got stalled. The contractors inspected the towers and came back with a report that the towers were so weak and they can’t hoist anything because of the heavy load. The weight of the tower is about 12 tonnes. So, they said it had to be because it was not part of the original contract, they said there was nothing they could do.

“So, the components have been delivered last week and they are in Ikeja and Kano. We are going to erect them. Already they have delivered the towers in these two locations. So, as soon as we finish the installation, which will just take about two months, the Americans who were doing the contract will now come and mount the radar on top.”

Mashi emphasised that with the installation of the components, Nigeria would by June, achieve 80 per cent of its airspace coverage, averring that the agency had earlier installed same equipment in Port Harcourt and Abuja.

“You know Doppler Radar System is an instrument that major characteristics of precipitation and as you know, precipitation, storm intensity, storm direction and other things can affect flight and operations, which means that with us now in a position to measure so much characteristics or precipitation, we will now be in a position to have adequate information that will help us to ensure that planning operations are made quite safe, and sustainable within the country. That is a major breakthrough,” he said.

Recalled that the contract for the Doppler weather radar was awarded in 2007 by the Federal Executive Council (FEC).

International flights to Lagos divert to Ghana due to poor equipment, leaving hundreds stranded

All international flights bound for Lagos, Nigeria, have been diverted to Ghana following poor weather conditions and complications from new equipment installation.

British Airways and Emirate Airlines are among the carriers unable to land at the Murtala Muhammed Airport in Lagos and were instead rerouted to Ghana. The diversions are roiling travel plans for many of their customers, according to statements emailed to affected passengers and reviewed by CNN.

The diversion was as a result of poor weather in Lagos, which is Nigeria’s commercial hub, and inadequate equipment to check visibility, according to the country’s Ministry of Aviation.

The airport is “in the process of replacing the old category 2 Instrument Landing Systems with the newly procured category 3 system that allows for the lowest visibility landing,” said James Odaudu, director of public affairs for Nigeria’s Ministry of Aviation.

Instrument Landing System (ILS) works as a signal navigation aid that guides pilots when landing in low visibility. Airport authorities in Lagos experienced difficulties replacing their old ILS with a new one, making it impossible for airplanes to land.

“Unfortunately, there was a malfunctioning of certain components, which, coupled with the unforeseen weather conditions, made landing at the airport difficult,” Odaudu said in the statement.

Passengers stranded at the Kotoka International Airport in the Ghana city of Accra have reacted angrily, saying it would have been easier if flights had been rerouted to Abuja, Nigeria’s capital city.

Fola Olatunji-David, a technology entrepreneur whose February 11 flight to Lagos was diverted, says British Airways has not made provisions to take them back to Nigeria after initial promises to do so.

“We landed in Accra on Tuesday night and they kept stringing us along. They kept changing the time, saying, ‘We will leave at 11 pm, we will leave at 2 pm’ but we are still here,” he said in reference to British Airways, in an interview with CNN.

Olatunji-David and other passengers have been in Accra for about three days, waiting for flights back to Lagos. He says many flights are fully booked, making it difficult to secure tickets back home.

“The airline became culpable when they left us to find our way home. There are minors on this flight, pregnant women, people who are now forced to get home on their own,” he added.

British Airways has not responded to multiple requests from CNN, seeking comment. But according to statements sent to passengers and reviewed by CNN, the airline blamed poor visibility at the Lagos airport and promised to cover passengers hotel, internet, and refreshments costs.

“We regret to inform you that due to the operational constraints, we have had to cancel this flight. We recommend that you make your own travel arrangements to Lagos as we are unable to operate safely in the coming days, ” the statement to passengers read.

In the meantime, the aviation ministry says it is trying to get back to normal. Officials approved diversion of more recent flights to Abuja, the country’s capital city.

Airlines like Qatar Airlines have already applied to redirect their flights to the Nnamdi Azikiwe International airport in Abuja and got approval for it, Odaudu said.

BBAM Orders Three 737-800 Boeing Converted Freighter.

BBAM and Boeing [NYSE: BA] has announced the lessor has ordered three 737-800 Boeing Converted Freighters (BCF), underscoring the growing e-commerce and express sector of the air cargo market. 

BBAM has one of the world’s biggest Next-Generation 737 fleets and has chosen the BCF program to convert three airplanes in its existing fleet.

“Through the Boeing freighter conversion program, these 737-800s will continue to deliver value for our customers and investors for many years to come,” said Steve Zissis, president and CEO of BBAM. 

“The 737-800 is an integral part of BBAM’s managed fleet of commercial passenger jet aircraft, and we see strong interest from our customers in the standard-body freighter. We chose Boeing’s conversion program because we believe it maximizes the platform’s capability and reliability.”

The 737-800BCF is built on the Next-Generation 737 platform, well known for its reliability and efficiency. 

The airplane carries up to 52,800 pounds (23.9 metric tons) of payload with excellent operating economics to maximize operators’ profits. 

Since entering service in 2018, the 737-800BCF has won 130 orders and commitments.

“BBAM is one of the world’s leading leasing companies, known for their smart approach to investment. We are delighted that BBAM has selected the Boeing Converted Freighter program to extend the life of their Next-Generation 737s and capture a new market opportunity in the years ahead,” said Ihssane Mounir, Boeing’s senior vice president of Commercial Sales and Marketing. “This agreement shows how we can serve our customers by delivering efficient and reliable airplanes and a portfolio of services that extracts value throughout the life of those jets.”

According to the Boeing Commercial Market Outlook, 2,820 freighters will enter the global fleet to meet market demand, including 1,220 standard-body passenger-to-freighter conversions. 

Responding to strong market demand, Boeing announced plans to add a 737-800BCF production line at Guangzhou Aircraft Maintenance Engineering Company Ltd. (GAMECO) this summer.

“Passenger-to-freighter conversions give us the opportunity to demonstrate our skill and expertise,” said GAMECO General Manager Norbert Marx. “Boeing Converted Freighters are the market leader – we are proud to partner with Boeing on this program.”

BBAM is the world's largest dedicated manager of investments in leased commercial jet aircraft providing over 200 airline customers in more than 50 countries with fleet and financing solutions over the last three decades. 

BBAM is the only manager in the aircraft leasing industry focused exclusively on generating investment returns for third-party investors. BBAM currently has more than US $27 billion of assets under management and employs over 150 professionals at its headquarters in San Francisco and in additional offices in Tokyo, Singapore, Zurich, Dublin, and Santiago. For more information about BBAM, please visit its website at www.bbam.com.  

GAMECO (Guangzhou Aircraft Maintenance Engineering Company Ltd.), established in October 1989 at Guangzhou Baiyun International Airport, is a joint venture between China Southern Airlines Co. Ltd. and Hutchison Whampoa (China) Ltd. from Hong Kong, that specializes in aircraft and airborne component maintenance, repair and overhaul. GAMECO provides comprehensive, high-quality and highly efficient services to customers, covering line maintenance, base maintenance, component repair & overhaul, aircraft engineering, training and technical service of ground support equipment.

Boeing is the world’s largest aerospace company and leading provider of commercial airplanes, defense, space and security systems, and global services. 

A top U.S. exporter, the company supports commercial and government customers in more than 150 countries. Boeing employs more than 160,000 people worldwide and leverages the talents of a global supplier base. 

Building on a legacy of aerospace leadership, Boeing continues to lead in technology and innovation, deliver for its customers and invest in its people and future.

source: Boeing

 

 

IATA warns Bangladesh's government against imposition of VAT on aeronautical services

The International Air Transport Association (IATA) has urged Bangladesh’s government to reconsider a decision to impose Value Added Tax (VAT) on aeronautical services for airlines operating in the country.

A directive from Bangladesh’s National Board of Revenue in November announced that VAT on services provided by the Civil Aviation Authority of Bangladesh (CAAB) would be subject to a rate of 15%. 

Those services include landing, parking, route navigation, security, boarding bridge facilities and port services.

In a letter addressed to Bangladeshi Prime Minister Sheikh Hasina, IATA Director General and CEO Alexandre de Juniac said such taxes harm the development of both air transport and local economies.

Not imposing VAT will ensure the continued development of air transport and its valuable contribution to Bangladesh’s economy

“We respectfully request you to direct the National Board of Revenue to rescind its decision to subject to VAT the various aeronautical and non-aeronautical charges levied by the CAAB on international air transport,” wrote de Juniac. 

“Not imposing VAT on these necessary services in line with international standards will ensure the continued development of the air transport sector and its valuable contribution to Bangladesh’s economy.”

IATA contends that imposition of the charges contradicts accepted policies and guidelines on taxation published by the International Civil Aviation Organization, the Organization for Economic Co-operation and Development, and the World Trade Organization.

“It is our strong contention that the aeronautical and related charges are VAT zero-rated and should not be subject to tax at 15%,” said de Juniac.

“This is because such services are directly related to, and necessary for, the operation of aircraft in international traffic and should not be considered as ancillary transport services.” 

Urging caution against the implementation of such taxes, de Juniac said that air transport is “a key contributor and enabler” to the Bangladeshi economy.

IATA statistics show that aviation generates $769 million in GDP and provides 129,000 jobs at present in Bangladesh, which could rise to $2.1 billion GDP and 140,000 jobs by 2038.

“However, the full potential that the air transport sector brings cannot be realized without a cost-competitive environment,” de Juniac warned.

Many jurisdictions, including Saudi Arabia, the EU, and Canada, do not subject most aeronautical services and related charges on international air transport to VAT.

2019, Worst Year for Air Freight Demand

The International Air Transport Association (IATA) released full-year 2019 data for global air freight markets showing that demand, measured in freight tonne kilometers (FTKs), fell by 3.3% compared to 2018 while capacity (AFTK) rose by 2.1%. This was the first year of declining freight volumes since 2012, and the weakest performance since the global financial crisis in 2009 (when air freight markets contracted by 9.7%). In the month of December, cargo volumes contracted 2.7% year-on-year while capacity rose 2.8%. Air cargo’s performance in 2019 was dampened by weak growth in global trade of just 0.9%. The sector’s underperformance was also due in particular to slowing GDP growth in manufacturing-intensive economies. Softer business and consumer confidence, along with falling export orders, also contributed to air freight struggles.  There are signs that confidence and orders could pick up in 2020. It is too early to say what long-term effects will be seen from the impact of restrictions associated with combatting the coronavirus outbreak. “Trade tensions are at the root of the worst year for air cargo since the end of the Global Financial Crisis in 2009. While these are easing, there is little relief in that good news as we are in unknown territory with respect to the eventual impact of the coronavirus on the global economy. With all the restrictions being put in place, it will certainly be a drag on economic growth. And, for sure, 2020 will be another challenging year for the air cargo business,” said Alexandre de Juniac, IATA’s Director General and CEO.

December 2019 (% year-on-year) World share1 FTK AFTK FLF (%-pt)2 FLF (level)3 Total Market 100.0% -2.7% 2.8% -2.7% 46.7% Africa 1.8% 10.3% 10.0% 0.1% 36.8% Asia Pacific 34.6% -3.5% 2.8% -3.4% 51.9% Europe 23.7% -1.1% 4.9% -3.2% 53.0% Latin America 2.8% -5.3% -3.1% -0.7% 30.0% Middle East 13.0% -3.4% 1.9% -2.6% 47.0% North America 24.2% -3.4% 2.1% -2.2% 39.5%

1 % of industry FTKs in 2019  2 Year-on-year change in load factor  3 Load factor level

Regional Performance All markets except Africa suffered volume declines in 2019. Asia-Pacific retained the largest share of FTKs, at 34.6%. The share of freight traffic increased modestly for both North America and Europe, to 24.2% and 23.7%, respectively. Middle East carriers’ traffic share held steady at 13%. Africa and Latin America saw their shares lift marginally, to 1.8% and 2.8%.  Asia-Pacific carriers in December posted a decrease in demand of 3.5% compared to the same period a year earlier. Capacity increased by 2.8%. The full-year 2019 saw volumes decline 5.7%, the largest decrease of any region, while capacity increased by 1.1%. As the world’s main manufacturing region, international trade tensions and the global growth slowdown weighed heavily on regional air freight volumes in 2019.  Within-Asia FTKs were particularly affected (down 8% compared to a year ago).  North American airlines saw volumes fall by 3.4% in December, while capacity grew by 2.1%. For 2019 in total, the region’s cargo volumes declined by 1.5%, compared to a capacity increase of 1.6%. Trade tensions and cooling US economic activity in the latter part of the year have been factors in the decline. The 5.6% fall in international year-on-year volumes in December was the weakest monthly growth outcome for the region since early 2016.  European airlines experienced a 1.1% year-on-year decrease in freight demand in December, with a capacity rise of 4.9%. The fall in December was typical of the performance for 2019 as a whole, where volumes fell 1.8%, but capacity increased by 3.4%. Softer activity, including in the manufacturing-intensive German economy, combined with ongoing Brexit uncertainty, contributed to the 2019 result, which in international freight volume terms was the weakest since 2012.  Middle Eastern carriers’ freight volumes decreased 3.4% year-on-year in December and capacity increased by just 1.9%, the lowest of any region. This contributed to an annual result of a decline in demand of 4.8% in 2019 – the second greatest decline in growth rate of all the regions. Annual capacity increased just 0.7%. Disruption to global supply chains and weak global trade, together with airline restructuring in the region, were the chief drivers of the weaker freight outcome.  Latin American airlines suffered the sharpest fall in demand of any region in December, of 5.3%. The region was also the only one to see a reduction in capacity (-3.1%). Although the region was the second strongest performer across 2019 as a whole, limiting its decline in volumes to just 0.4%, social unrest and economic difficulties in several key countries led to the weakest international FTK outcome since 2015. Annual capacity increased 4.7%. African carriers’ saw freight demand increase by 10.3% in December 2019, compared to the same month in 2018. This was reflected in the strong 2019 full-year performance, which saw Africa freight volumes expand 7.4%. Capacity in December grew by 10% and for 2019 in total, increased by 13.3%. Over the year, air cargo volumes have been supported by strong capacity growth and investment linkages with Asia.

How Coronavirus affect India's economy

The coronavirus outbreak, which has its epicentre in China’s Wuhan city, can impact some sectors of India’s embattled economy.

China is the country’s biggest trading partner, accounting for the largest share (14%) of Indian imports in financial year 2019. It is also the third-largest market for domestic goods, accounting for 5% of India’s exports last financial year.

“The disruption caused, if prolonged, could have a bearing on India’s imports from the country which is critical for domestic economic activity. Finding substitutes for imports from China in the near term could be a challenge,” noted credit agency CARE Ratings in a recent report. “Further, a slowdown in economic activity in China could impact exports from India.”

There have been three confirmed cases of coronavirus in the country so far, all in the southern state of Kerala. The state government, on Feb. 4, declared the fatal disease as a “state calamity.”

In China, the disease has claimed 563 lives, so far. Due to the panic, on Feb. 3, Chinese stock markets faced their worst sell-off in many years, wiping out nearly half a trillion dollars from the value of the country’s leading firms.

Impact on industries

The hit on the Chinese economy is bound to have a domino effect on a host of sectors in India.

• Tourism: In 2019, India’s total foreign tourist arrivals (FTA) stood at 10.9 million, of which Chinese travellers accounted for 3.12%. “Despite it being marginal, FTA share from China has been increasing for the past few years. Therefore the Indian tourism industry is expected to be negatively impacted during 2020,” CARE Ratings said in its report.
• Aviation: The sector which could be most impacted is Indian aviation. The outbreak has forced Indian carriers to the cancel and temporarily suspended flights operating from India to China and Hong Kong. Carriers such as Indigo and Air India have halted operations to China.
  Another domestic carrier SpiceJet is offering a waiver of cancellation/change fee for flights booked to China. “The temporary suspension of flights to China and Hong Kong can approximately lead to an Indian carrier missing out on gross revenue of Rs55-72 lakh per flight,” CARE stated.
• Bollywood: Due to the outbreak, China has closed nearly 70,000 theatres, according to reports. Recent years have witnessed many Bollywood movies, like Dangal and 3 Idiots, become massive hits in the country and the demand is only growing. Now, many scheduled releases will be impacted due to the fatal virus disease.
• Electronics: About 6-8% of India’s exports of electronic goods is to China. Also, around 50-60% of India’s demand for electronics is met by China, as per the CARE report. “In FY19, the share of imports of electronic goods from China declined to about 37% from the share of 57% a year ago,” it noted.  Based on the decreasing dependence in FY19, the report observed that the impact on the electronics good market will be “limited”.
• Auto and auto components: India’s automobile industry is already struggling with falling sales. Car sales fell 19% last year while sales of two-wheelers declined 14%, Reuters reported. Vehicle makers, including market leader Maruti Suzuki, import components and raw materials from China. However, Maruti’s chairman thinks this will not impact the sector. “It’s not a large amount,” RC Bhargava told CNBC, referring to the number of components Maruti and its vendors import from China. “Total imports are small, but the point is that for a car, even if one component is not there, I can’t put the car on the road.”
  The Care Ratings report also echoed Bhargava’s opinions. “India’s exports of transport equipment to China account for a negligible share of about 0.5% of the total transport equipment exported from the country,” it said.
  Besides, the coronavirus outbreak has hit the ongoing Auto Expo 2020 in Delhi. The Indian government had issued an advisory temporarily suspending e-visa facility for Chinese travellers and foreigners, following which, Chinese manufacturers decided to let their Indian representatives man the stalls at the auto expo.

Export opportunity, import crisis

The crisis, though presents an opportunity for Indian exporters.

“With local production being affected (due to the coronavirus outbreak), there could be an increase in China’s imports from other countries which can provide an opportunity for Indian manufacturers,” the CARE report observed. India mainly exports chemicals, petroleum, agriculture, engineering goods, cotton yarn and plastics to China.

However, substituting imports from China can be tricky. India largely sources electronics, engineering goods, and chemicals from China. “Non-availability of such products from China would mean related parties in India will have to scout for alternative markets which can mean higher costs,” the report added.

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