Sky Routes 'Kkumteul' Demand Recovery 'Remote'

On the 18th, Terminal 1 arrival hall at Incheon International Airport is deserted due to the impact of the novel coronavirus (COVID-19). Photo by Moon Honam munonam@

[Asia Economy Reporter Yoo Je-hoon] As the novel coronavirus infection (COVID-19) pandemic enters a stabilization phase, the skies that were shut down are beginning to stir. Major tourist countries are unlocking the gates they had closed due to COVID-19, and national airlines are considering restarting international flights, but the industry largely agrees that the road to demand recovery remains long.

According to the Financial Supervisory Service's electronic disclosure system on the 18th, the operating loss on a separate basis for the first quarter of six listed national airlines (Korean Air, Asiana Airlines, Jeju Air, Jin Air, T'way Air, Air Busan) reached about 420 billion KRW. Including two unlisted companies (Air Seoul and Eastar Jet), the losses are expected to increase further.

Revenue also dropped significantly. The combined revenue of the six national airlines was 4.2258 trillion KRW, down about 27% compared to the same period last year. The decrease in revenue and operating losses are expected to grow larger. The situation in the second quarter is projected to have worsened further, as the full suspension of international flights began in March.

The industry is reducing losses through high-intensity cost-cutting measures such as wage cuts and temporary shutdowns, and focusing on cargo operations, but the effect is expected to be limited unless flight resumptions become full-scale.

Fortunately, recently the spread of COVID-19 has somewhat stabilized, and some countries are easing entry restrictions. Italy will lift the 14-day quarantine for European Union (EU) Schengen Agreement member countries starting next month on the 3rd. Other major tourist countries such as Greece are also reportedly cautiously considering unlocking their gates.

China has already agreed to implement a fast-track system (simplified entry procedures) exempting mandatory quarantine periods for South Korean nationals and businesspeople starting this month, and Japanese Foreign Minister Toshimitsu Motegi has also stated that Japan will comprehensively review the simplification of entry procedures.

In line with this, our national airlines are also exploring the resumption of international flights. Korean Air plans to resume operations on 19 routes next month, and Asiana Airlines plans to restart 13 routes. In particular, Asiana Airlines will resume 10 routes in China, its main market.

An industry official said, "Most of the routes being considered for resumption have high business demand, and even before, many passengers were willing to endure mandatory quarantine to travel, so the load factors were high," adding, "This will help improve profitability."

However, the possibility of a second wave of COVID-19, as seen in the club-related infection incident, remains a factor limiting airlines' flexibility. Especially since most countries, including South Korea, have strengthened entry controls such as mandatory quarantine, actual demand has not materialized. For example, Air Macau resumed flights on the Incheon-Macau route on the 9th but suspended operations again after only three days due to the club-related infection incident.

Regarding full-scale demand recovery, pessimistic forecasts still dominate. The International Air Transport Association (IATA) recently published a report predicting that air travel demand will not return to pre-COVID-19 (2019) levels until 2023.

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