PHILIPPINE airlines are unlikely to bounce back to their pre-pandemic passenger volume in 2021, Fitch Ratings said, as the continued spread of the coronavirus disease 2019 (COVID-19) in the Philippines remains a “high risk.”
In its latest non-rating action commentary, Fitch Ratings said passenger traffic at airlines in some key Asia-Pacific markets, including the Philippines, will remain “well below 2019 levels in 2021, despite a recovery.”
“The pace of the recovery will hinge on each market’s relative success in bringing the coronavirus pandemic under control, helping to improve passenger confidence and reduce the risk of further travel restrictions, as well as its share of international traffic, which we expect to stay weaker than domestic volume,” it said.
Fitch Ratings said the Philippines and Indonesia will “see average RPK (revenue passenger kilometers) levels at 35% of the baseline in 2020 and 60% in 2021.”
RPK is a metric used by the airline industry showing the number of kilometers traveled by paying passengers.
Airlines in Thailand and Malaysia are “likely” to see the same RPK levels, as international traffic volume will remain weak despite the countries’ success in curbing the pandemic.
Flag carrier Philippine Airlines, operated by PAL Holdings, Inc., ferried 16.8 million passengers last year while budget airline Cebu Pacific, operated by Cebu Air, Inc., carried 22.5 million passengers. Philippines AirAsia, Inc. carried 8.55 million passengers in 2019.
The Philippines continues to see a rise in COVID-19 infections. The Health department on Monday reported 3,073 new confirmed coronavirus infections to bring the total to 307,288 cases.
Fitch Ratings said its forecasts are based on the assumption that a COVID-19 vaccine or treatment would not be widely available in 2021, “but that progress is made in controlling the pandemic.”
“Airline passenger volume could improve faster than we forecast if an effective vaccine is distributed sooner than we believe or if there is more success in containing the pandemic. However, we foresee flat demand in 2021 that is well below the 2019 base should there be limited progress on this measure,” it said.
China is the only country in the Asia-Pacific region that is expected to recover in terms of air passenger traffic, as it has managed to control the pandemic.
“Average RPKs for 2021 may recover to at least the 2019 level if China evades another wave of the pandemic. Year-on-year declines in monthly RPKs have been narrowing over the last few months, but we think total RPKs for 2020 may still fall by around 40%, with domestic RPKs being around 30% lower,” Fitch Ratings said.
For Vietnam, the debt watcher said airlines there “should rebound faster” than their counterparts in other ASEAN countries. “[This] is due to the country’s low incidence of COVID-19 cases. We forecast average RPKs of around 55% of the baseline level in 2020 and 90% in 2021,” Fitch Ratings said.
Singapore could see a 70% drop in its passenger volume this year, as airlines there are completely reliant on international routes, it said.
Fitch Ratings expects Singapore airlines’ passenger traffic to remain at around 50% next year, also below their 2019 levels. — Arjay L. Balinbin