Singapore — The Asian aviation industry's recovery has been clouded by a resurgence of the coronavirus pandemic and is poised for further headwinds due to possible disruptions in the coming months amid weakening global macroeconomics.
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Register NowAccording to industry sources, high infection rates, particularly in countries such as India, could derail aviation recovery and send jet fuel prices into a tailspin once again.
The COVID-19 resurgence has pushed the FOB Singapore jet fuel/kerosene cash differential to deep discount of minus $1.20/b to the Mean of Platts Singapore jet fuel/kerosene assessment on Sept. 21, falling $1.57/b since the beginning of the year.
At its lowest level this year, the cash differential plunged to MOPS minus $4.67/b on May 4, Platts data showed, marking the lowest level since January 1998.
The bearishness was also reflected in the derivatives market, where the front-month October/November timespread was assessed at minus 82 cents/b at the Asian close Sept. 21. The front-month timespread has been in a contango structure for most of the year and was last backwardated Jan. 31 at plus 48 cents/b.
India has resumed its domestic flights and is operating special international flights under the Vande Bharat Mission, bringing nationals home from across the globe, but the outlook remains glum. The country's infection rates have soared to over 5.56 million, making it the second-most infected nation and spurring concerns of another series of lockdowns.
India in late August extended its ban on international commercial flights to Sept. 30, and S&P Global Platts Analytics recently noted domestic flights are currently down by 59% from pre-COVID-19 levels, and international travel is down 69%.
Spiraling COVID-19 infections in Myanmar triggered the country on Sept. 20 to extend its lockdown measures, forcing domestic airlines to suspend all flights through September, various news media reported.
Philippines' President Rodrigo Duterte has announced Manila will remain under a strict lockdown until Sept. 30, news agency Xinhua reported.
"I don't see hope in the [Asian] aviation industry [in the short term], more airliners will be in need of cash injection by governments or shareholders," an industry source said.
Industry's dire plight
With COVID-19 causing demand carnage globally, the aviation industry worldwide is headed for a "previously unimagined level of disruption" as the next few months unfold, consultancy firm Centre for Asia Pacific Aviation, or CAPA, said in a Sept. 20 report.
"Today, most national borders are effectively closed to airline operations," CAPA said. "Once again, it is the fear of illness, and perhaps death, that has been clearly demonstrated as a major deterrent to air travel. Added capacity and even 'ultra-low fares' will not persuade travelers to fly if sanitary and health conditions are risky."
CAPA said in an earlier report the largest threat is the prospect of renewed surges of COVID-19 infections, and a sustained return of broader travel bans could be a mortal blow to some Asian airlines.
"So long as borders are closed, wholly or partially, international recovery is impossible," CAPA added.
Separately, travel data and analytics company Cirium noted Sept. 16 that first-half September has been marked by a renewed decline in international passenger jet flight activity.
Cirium reported the seven-day rolling average for global daily international flight arrivals had declined from above 9,400 on Aug. 31 to below 8,700 by Sept. 15.