Singapore — Asia Pacific airlines are poised to see a gradual recovery in air travel demand and passenger volumes as governments around the globe ease border restrictions and launch travel initiatives -- including green lane arrangements and travel bubbles -- in a bid to revive the ailing aviation industry.
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Singapore Airlines Group, for one, saw its total passenger count in September grow for the second consecutive month, by 7.04%, after the city-state government eased border control restrictions, the flagship carrier said late Oct. 15. Singapore Airlines and its regional arm SilkAir on Oct. 4 announced a gradual increase in flight capacity to 15% by December, higher than the previous estimate of 11% made in September.
"These positive developments have helped to bolster the SIA Group of airlines' ongoing recovery from COVID-19," Singapore Airlines said in a statement.
At the Asian close Oct. 16, FOB Singapore front-month October-November jet fuel derivatives were assessed at minus 61 cents/b, having recovered from the trough in May but remaining in a contango structure. At its lowest level this year, the front-month timespread stood at minus $8.19/b on May 26, S&P Global Platts data showed.
The FOB Singapore jet fuel/kerosene cash differential has similarly registered a significant recovery. It was assessed at a discount of 66 cents to the Mean of Platts Singapore jet fuel/kerosene assessment on Oct. 16, rebounding from a historical low of minus $4.67/b on May 4, Platts data showed.
Industry experts have noted that much of the recent uptick in demand has stemmed from collaborative efforts between countries and aviation trade associations, in successfully rolling out plans to heal the aviation industry. These include pursuing reciprocal green lanes and bilateral travel bubble arrangements, among other proposals.
Singapore sealed its green lane arrangement with Indonesia on Oct. 13, joining China, South Korea, Brunei, Japan and Malaysia, allowing essential workers to travel between the two countries. In the same week, Singapore announced a two-way travel bubble with Hong Kong. While details of the travel bubble are still in the works, Singapore's Transport Minister Ong Ye Kung said the arrangement was "a small but significant step" for the two aviation hubs.
Elsewhere, Thailand is also hoping to strike up travel bubble talks with China by January, according to numerous media reports. If that comes to pass, it will provide a much-needed support for Thailand's aviation sector, with national carrier Thai Airways currently in a phase of debt restructuring to avoid bankruptcy. China accounted for more than a quarter of the country's tourism sector before the COVID-19 pandemic.
In addition, industry sources said the implementation of strict safety measures onboard flights, such as mandatory masks on flights and safe distancing, have worked to mitigate fears of flying and help rekindle travelers' confidence. A survey by global travel data provider OAG on Oct. 6 showed that 69% of travelers intended to fly internationally within the next six months, while 79% have plans for domestic air travel. The eagerness to travel is more apparent among millennials and Generation Z, OAG reported.
"Most consumers, especially younger travelers, are prepared to fly under the right circumstances," OAG chief analyst John Grant said in a report accompanying the survey.
"The lack of fear is certainly surprising and bodes well for the market recovery," he said. "Of course, full recovery will be driven by how well we fight the pandemic globally and when travel restrictions are safely lifted."
Recovery on the horizon, albeit slow
The recovery of the aviation sector and jet fuel is considered to be on track, albeit at a gradual pace; industry experts have warned that the resurgence of COVID-19 infections will weight heavily on the gradual pick-up in passenger traffic seen in recent months.
That is against the backdrop of a looming cash flow crisis in the industry, threatening the existence of some airlines.
"We now assume 2021 traffic will be down more than 30% from the 2019 baseline for our base case, compared with our prior assumption of roughly 20%," Fitch Ratings said Oct. 12, adding that traffic is not expected to return to 2019 levels globally until 2024, with the pace of recovery diverging across regions.
The International Air Transport Association agrees, saying that while the coronavirus pandemic will continue to cause severe disruption to global air travel, the industry in Asia was bracing for a cash flow crisis that could threaten the very survival of several heavily indebted Asia Pacific airlines.
The association forecast in its latest report the airline industry will burn through $77 billion cash during the second half of 2020 -- equivalent to $300,000 per minute -- despite the restart of operations.