Asia-Pacific June air passenger traffic plunges 98%, cargo demand falters: AAPA

Singapore — Air passenger traffic in Asia-Pacific fell for the fifth consecutive month in June, as coronavirus-triggered movement restrictions curbed international air travel, preliminary data released by the Association of Asia Pacific Airlines showed July 28.

Asia-Pacific airlines carried 724,000 international passengers in June, a 98% plunge from June last year. After accounting for a 93% decline in available seat capacity, the average passenger load factor was 36.3% for the month, AAPA said.

AAPA added that air cargo demand -- measured in freight tonne kilometre -- was 20.3% lower on the year, as demand for exports continued to falter with pandemic disrupting global supply chains.

"International travel demand evaporated in the second quarter. Most flights were only operating to repatriate people to their home countries. Meanwhile, air cargo demand declined by 16% during the first half of the year, reflecting the general deterioration in consumer and business confidence," Subhas Menon, director general for the AAPA, said.

Menon further added that the airline industry is "in a perilous condition" as international flights continue to be grounded by border closures and onerous quarantine requirements, even when domestic lockdowns are being eased.

"The prospect of a recovery in travel markets during the second half of the year is increasingly uncertain, as governments grapple with a resurgence of local infections, with the re-imposition of community lockdowns and further tightening of travel restrictions ... Airlines in the Asia Pacific region are rapidly depleting cash reserves and incurring massive losses," Menon added.

Mirroring this view, Singapore Airlines Group in mid-July said it expected lower jet fuel consumption amid curtailed capacity ahead due to the coronavirus pandemic. The airline group anticipates a material operating loss for April-June quarter.

In the Asian jet fuel market, the outlook remained bleak amid a resurgence of coronavirus infections, denting demand for air travel once again.

"The underwhelming demand is a reality, no doubt the market [for prompt jet fuel cargo] is tight, but there is no demand. Demand has been subdued for the longest time now," a Singapore-based refining source said.

"Moreover - who is flying? Eventually, only those who need to travel for business will do so, but airlines are facing massive drops in passenger demand now," the source added.

In line with the bearish sentiment, the FOB Singapore jet fuel front month August/September timespread remained in a contango structure of minus 47 cents/b at the 0830 GMT Asian close July 28. Year-to-date, the front month timespread has fallen 80 cents/b since January 2, 2020 at plus 33 cents/b, S&P Global Platts data showed.

The FOB Singapore cash differential has also fallen in tandem and was assessed at a discount of 38 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessment on July 28, down 75 cents/b since the beginning of the year.

Further down the forward curve, the Q4 2020/Q1 2021 quarterly jet fuel/kerosene spread remained in negative territory and was assessed at minus $2.06/b July 28, Platts data showed.