Japan's ANA sees June domestic flight cancellation rate at 69%, down from 86% in May

Japan's top airline All Nippon Airways said Thursday its domestic flight cancellation rate for June was 69% of its fiscal 2020-21 plan for the month, compared with 86% in May, as it sees some recovery in flight bookings - a move welcomed by local refiners for its potential to increase jet fuel demand.

"It's good news and it should recover some [jet fuel] demand," a source with a Japan refiner said in response to ANA's announcement.

"However, it should take time to recover the level of demand that has been lost as we are in a situation where people do not travel, and we do not travel for business," the source added.

ANA's expected reduction in domestic cancellations includes flights on the main routes between Tokyo and major regional cities in June, and it is also resuming 23 domestic routes in June in local areas, including some where there was no flights in May, company officials said.

"We are seeing an increase in new flight bookings since around the Golden Week national holidays [over late April to early May], and the new bookings have slightly surpassed flight bookings," a company official said.

However, ANA was not overly optimistic about its international flight demand recovery amid the coronavirus pandemic, the official added.

ANA sees its international flight cancellation rate at 91% of its annual plan in both the first half and second half of June, compared with 93% in May, the company officials said.

PRICE PLUNGES 59%

The coronavirus pandemic has led to a free fall in jet fuel/kerosene prices as multiple countries scrambled to tighten borders in a bid to curb the spread of the flu-like disease, forcing airlines to slash flights.

The FOB Singapore jet fuel/kerosene stood at $32.93/b at the 0830 GMT Asia close Wednesday, down $47.35/b or 59% since the start of the year, S&P Global Platts data showed. The outright jet fuel/kerosene price hit a 21-year low at $13.06/b on April 22; it was last lower February 19, 1999, when it was assessed at $14.50/b, Platts data showed.

Despite a recent increase in domestic flights in several countries in Asia, industry sources said bearishness in the aviation sector was likely to be prolonged as passenger hesitation over flying lingered.

"I think jet [fuel] will be the last to recover because traveling by air is not a daily necessity like [the use of] diesel and gasoline ... Because of the impact of COVID-19 on businesses and the economy, everyone will be tightening budgets and overseas business trips will be avoided if possible, unless needed. So, I feel that the bearishness will continue until the end of Q3," a Singapore-based refining source said.

According to a report by the International Air Transport Association earlier in May, the pandemic will result in semi-permanent damage to the airline industry and subdue passenger revenue until 2024.

"We think that COVID's effects on air travel are certainly going to last for a number of years, with no quick rebound to 2019 levels, unlike the current forecast for GDP," IATA chief economist Brian Pearce said in the report.