[Click eStock] Aviation Industry in Crisis... International Passenger Transport Down 47% in February

February Nationwide International Passenger Transport at Half Last Year's Level
Significant Reduction in International Routes...Cargo Transport Demand Also Expected to Decline

On the 6th, the airline ticket counters at Terminal 1 of Incheon International Airport are quiet. Photo by Moon Honam munonam@

[Asia Economy Reporter Minwoo Lee] As the novel coronavirus infection (COVID-19) spreads worldwide, passenger demand has plummeted by nearly half. Although urgent cargo transport demand has increased, many airlines around the world have suspended route operations, leading analysts to believe that this improvement will be only temporary.

On the 9th, NH Investment & Securities maintained a 'neutral investment' opinion on the air transportation industry. This is because both passenger and cargo transport demand are expected to worsen further this month.

According to NH Investment & Securities, last month, international passengers at airports nationwide decreased by 47% compared to the same period last year. For short-haul routes, declines were 55% for Japan, 77% for China, and 40% for Southeast Asia. Among long-haul routes, the Americas increased by 5.6%, but Europe decreased by 9.4%.

Accordingly, airlines are significantly reducing international flights. As of last month, the change rates in international flights by airline were ▲Korean Air down 37%, ▲Asiana Airlines down 39%, ▲Jeju Air down 47%, ▲Jin Air down 63%, ▲T'way Air down 50%, ▲Air Busan down 66%, and ▲Eastar Jet down 64%.

Jeong Yeonseung, a researcher at NH Investment & Securities, explained, "As COVID-19 spreads to Europe and the United States, major national carriers are reducing medium- and long-haul routes, and Japan, a key short-haul route, has implemented quarantine measures for Korean arrivals, so demand for routes to the Americas, Europe, and Japan is expected to decline again."

Some analysts suggest that cargo transport demand is recovering. In fact, last month, international cargo volume was 219,719 tons, an increase of 20.2% compared to the previous year. However, this is interpreted as a base effect due to the Lunar New Year holiday and an increase in urgent cargo demand caused by global supply chain disruptions. Due to the global trade slump caused by the spread of COVID-19 and decreased demand from China, it is expected that even this will decline starting this month. Researcher Jeong said, "Along with the base effect, urgent cargo volume is increasing, and with U.S. airlines suspending flights to China, domestic airlines may temporarily benefit in terms of volume. However, due to reduced passenger operations, the growth rate is expected to shrink from this month."

In this situation, airlines are expected to continue struggling for the time being. Aircraft utilization rates have plummeted, making it difficult to cover fixed costs, and cash assets are rapidly decreasing, raising liquidity concerns.

Researcher Jeong diagnosed, "Low-cost carriers will inevitably face liquidity crises within 2 to 3 months without government support. Major national carriers (FSC) with high debt ratios and many bond maturities requiring extension will also face increasing financial burdens." He added, "Although there is anticipation for industry restructuring through supply reduction and mergers and acquisitions (M&A) between companies, considering that there was already an oversupply situation before COVID-19, it is difficult to see this as ultimate industry restructuring unless operating aircraft are reduced."

This content was produced with the assistance of AI translation services.