Tuesday, June 15, 2021

Airlines seek P8.6B monthly aid; CEB cancels over 26K flights

BUDGET airline Cebu Pacific said Monday, May 18, 2020, it has cancelled over 26,400 flights as of May 2020 due to the Covid-19 pandemic, mirroring the aviation industry’s growing economic pain.

Quarantine and travel restrictions within the Philippines and in several countries prompted the carrier “to make the difficult decision to suspend all passenger flights in mid-March.”

Listed operator Cebu Air Inc. told the stock exchange it’s now seeking government aid through grants and loans alongside fee waivers and regulatory relief.

Earlier, Air Carriers Association of the Philippines (Acap), whose members are Philippine Airlines, Cebu Pacific and AirAsia Philippines and their affiliates, sought financial aid of about P8.6 billion per month, including wage subsidies as the Covid-19 pandemic continues to crush the travel and tourism industry.

Acap’s vice chairman Roberto Lim, in a national report said, the request for financial aid consisted of P1.3 billion in wage subsidies, P6.8 billion in working capital and P500 million in navigational and airport charges paid to gateways around the Philippines.

The Gokongwei-led airline reported a 25 percent reduction in revenues to P15.9 billion and a net loss of P1.18 billion for the first quarter of 2020, a record 135 percent negative turnaround from the same period last year.

In the first three months of 2020, it flew only 4.4 million passengers, down 17 percent while total flights dropped 15 percent.

During the company’s annual stockholders meeting on May 14, the firm’s chief executive officer (CEO) Lance Gokongwei said the pandemic crisis hurt the airline’s first quarter performance, coming from a remarkable year in 2019 when it flew 22.5 million passengers, up 11 percent from 2018, backed by stronger underlying demand.

The company is now reviewing its long-term fleet plan, notwithstanding its very conservative fleet growth plan compared to other low-cost carriers in the industry, with a five-year estimated growth of only eight to nine percent.

“CEB has begun discussions with suppliers on this overall fleet plan and schedule, to establish flexibility to adapt to current events,” a company disclosure said.

The firm is slashing its capital spending for 2020 to P13 billion from the original P28 billion, as it postpones “previously planned aircraft capital expenditures.”

As of April 19, 2020, Cebu Pacific’s forward bookings for the next five months showed only 14 percent of seats sold, down from 28 percent of seats sold in the same period last year.

The airline attributed this to upcoming flight cancellations and likely decline in overall travel demand.

Gloomy outlook

Data from the International Air Transport Association (Iata) points to a slow recovery spanning several years, saying quarantine measures on arrival are likely to derail confidence on air travel.

On May 13, Iata said the industry could return to pre-crisis levels in 2019 by 2023 or 2024.

“Major stimulus from governments combined with liquidity injections by central banks will boost the economic recovery once the pandemic is under control. But rebuilding passenger confidence will take longer. And even then, individual and corporate travelers are likely to carefully manage travel spend and stay closer to home,” said Iata director general and CEO Alexandre de Juniac.

He noted the crisis “will cost many jobs and rob the economy of years of aviation-stimulated growth.”

“To protect aviation’s ability to be a catalyst for the economic recovery, we must not make that prognosis worse by making travel impracticable with quarantine measures,” de Juniac said.

He said the industry needs a solution for safe travel that addresses two challenges, namely giving passengers confidence to travel safely and without undue hassle and governments confidence that they are protected from importing the virus.


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