Clouds are gathering around the airline industry, especially in the Asia-Pacific. Photo / Grant Bradley
Clouds are gathering around the airline industry, especially in the Asia-Pacific. Photo / Grant Bradley
COMMENT:
In aviation you never want to waste a crisis.
There's a big one hitting the sector now; the spread of coronavirus and it's had a 9/11-type impact on demand.
By one account, some airlines' most pessimistic modelling this week is not keeping up with the collapse in ticket sales.
Business travel is being canned as employers fulfil duty of care obligations and the highly discretionary leisure travel is in some cases being cancelled, other trips are being deferred and at the very least travellers are avoiding epidemic hot spots.
Online corporate travel booking company Serko is the latest to advise the market its business is being hurt by the coronavirus crisis with reservations down by up to 8 per cent.
This comes after a flurry of profit warnings from airlines including Air New Zealand and across all routes it is estimated airline capacity into New Zealand has shrunk by 6 per cent in the past month.
There are real concerns that some airlines, especially from China which have suspended or pulled back services, may not restore them.
That's prompted a timely release of data on fees and charges from airline lobby group the Board of Airline Representatives, which says ''one or two'' are at risk of leaving, with extra costs coming as coronavirus bites. It's been working on the figures for some time but released them ahead of a meeting between aviation and tourism leaders and the Government.
Barnz points out that any airline departure would cost the country tens of millions of dollars a year in tourism revenue.
Its hoping the Government will hear its plea, supported by Airports NZ, and put the brakes on looming fee hikes by border agencies.
Barnz has also turned the spotlight on one of its favourite targets, airports, as lobbying heat is turned up ahead of proposed law changes that could rein in airports' ability to charge as they see fit.
For Air New Zealand boss Greg Foran his planned 100-day look at the business is taking on a new dimension. Twenty three days into the new job he's seen one of his airline's planes involved in the Wuhan rescue mission, capacity into Asia slashed and trimmed closer to home.
The airline has warned its underlying earnings may slide by $75 million for the year and the coronavirus has pushed down the airline's share price by 9 per cent in the time he's been in the hot seat.
He wasn't expected to announce big changes until later in the year, but the Covid-19 fallout is going to crystallise thinking in a hurry.
He will be wary of being seen to cut costs at the expense of maintaining quality, but the crisis will allow him to stamp his mark early on the business. Airlines earn money quickly in good times but burn it just as quickly when the market turns sour and the next fortnight will be critical.
Airport officials check whether the Chinese entrants studying in South Korea. Photo / AP
One flip side of the economic slump in China is oil prices which have slumped by 16 per cent since the beginning of the year, which helps airlines — depending on how much of their fuel they have hedged at higher prices.
For Air New Zealand the sharp cutback on flying will mean aircraft are freed up to cover for those grounded due to ongoing Dreamliner engine problems.
After the terror attacks of 9/11, the Sars outbreak in 2003 and the global financial crisis most airlines came back strongly and as an industry have been in the rare position of being in the black for the past few years.
For Kiwis unwilling to travel overseas, maybe now's a great time to ''not leave home until they've seen the country''.
Domestic tourism spending already exceeds that by overseas visitors and as long as the coronavirus - or equally fear of it - doesn't take hold, this could grow.
For Auckland Airport the crisis could cost it $10m. But it's not all bad.
Fewer aircraft movements will provide more opportunity to do some much needed heavy maintenance on its runway.
