Money

Billions in losses and hundreds of thousands of jobs on the line as airline industry faces pandemic

Airlines will need immediate and direct financial support from the government if companies are to avoid insolvency and mass layoffs, IATA has advised. Billions in losses and hundreds of thousands of jobs on the line as airline industry faces pandemic

The IATA is urging countries in Asia and the Pacific to take urgent action to provide financial support to their airline industry. Thomas Dutour/Shutterstock

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Sangam Prasain

Published at : April 13, 2020

Updated at : April 13, 2020 09:06

Kathmandu

The Covid-19 pandemic is likely to cause the biggest slump in Nepal's aviation industry, triggering a domino effect on the county's tourism sector, say industry insiders.

Nearly Rs50 billion revenue will be wiped out and 175,000 people rendered jobless in Nepal's aviation industry due to the Covid-19 outbreak, according to an estimate by the International Air Transport Association (IATA).

The estimate is based on a scenario where severe restrictions on travel are lifted after three months. Losses are expected to balloon with some companies facing potential collapse, according to IATA, an international trade association for airlines.

Nepal is expected to see passenger demand fall by 39 percent year-on-year, translating into losses of 2.6 million passengers in both domestic and international sectors this year alone.

Last year, Nepal's international and domestic air passenger traffic crossed 7.32 million, with more than 20,000 travellers taking to the skies daily.

The IATA is urging countries in Asia and the Pacific to take urgent action to provide financial support to their airline industry.

"While each country will see varying impacts on passenger demand, the net result is the same—their airlines are fighting for survival, they are facing a liquidity crisis, and they will need financial relief urgently to sustain their businesses through this volatile situation,” Conrad Clifford, IATA’s regional vice-president, Asia-Pacific, said in an interview with Asian Aviation, an industry publication.

Australia, New Zealand and Singapore have already announced substantial packages to support their aviation industries.

“Governments need to ensure that airlines have sufficient cash flow to tide them over this period, by providing direct financial support and facilitating loans, loan guarantees, and support for the corporate bond market," said Clifford. “Taxes, levies, and airport and aeronautical charges for the industry should also be fully or partially waived.”

Nepal announced an extension to the nationwide lockdown for at least one additional week until April 15 and extended the suspension of regular international flights until April 30. Domestic flights are suspended until April 15.

“In the context of the Covid-19 outbreak and extended lockdowns all around the world, airlines and tourism industries have been and will be the hardest-hit for at least two years," said Vijay Shrestha, vice-president of administration at Himalaya Airlines. "Many companies in the sector will become insolvent and the survival will be tough post outbreak if the government doesn’t support us.”

Helicopter companies have already decided to slash salaries for their pilots and engineers for April by 65 percent as they move to cut costs amid the deepening coronavirus pandemic.

Airlines flying fixed-wing aircraft are expected to follow suit.

According to Shrestha, the government should provide tax waivers for two years on aircraft lease, VAT, insurance and import of spares, and remunerate taxes.

Two years’ waiver of airport landing, parking and navigation charges at Tribhuvan International Airport, interest refinancing by the government for a year, and rescheduling of loans would do a lot to bail out the industry, he said.

Raj Kumar Chhetri, spokesperson for the Civil Aviation Authority of Nepal, said that governmental support is needed immediately; otherwise, airlines may collapse, leaving hundreds of people jobless.

"We are planning to consider a waiver on airport parking charges for local airlines to allow them to recover from the current crisis," said Chhetri. "Once the management approves the proposal, it will be tabled at the board before being sent to the Cabinet."

IATA has advised direct financial support to compensate for reduced revenues and a liquidity crisis caused by travel restrictions imposed as a result of Covid-19.

Frequently asked questions about the coronavirus outbreak

UPDATED as of September 22, 2020

What is Covid-19?
Covid-19, short for coronavirus disease, is an illness caused by the coronavirus SARS-CoV-2, short for severe acute respiratory syndrome coronavirus 2. Common symptoms of the disease include fever, dry cough, fatigue, shortness of breath and breathing difficulties. In severe cases, the infection can cause pneumonia, severe acute respiratory syndrome, kidney failure and even death.

How contagious is Covid-19?
Covid-19 can spread easily from person to person, especially in enclosed spaces. The virus can travel through the air in respiratory droplets produced when a sick person breathes, talks, coughs or sneezes. As the virus can also survive on plastic and steel surfaces for up to 72 hours and on cardboard for up to 24 hours, any contact with such surfaces can also spread the virus. Symptoms take between two to 14 days to appear, during which time the carrier is believed to be contagious.

Where did the virus come from?
The virus was first identified in Wuhan, China in late December. The coronavirus is a large family of viruses that is responsible for everything from the common cold to Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS). After an initial outbreak in Wuhan that spread across Hubei province, eventually infecting over 80,000 and killing more than 3,000, new infection rates in mainland China have dropped. However, the disease has since spread across the world at an alarming rate.

What is the current status of Covid-19?

The World Health Organisation has called the ongoing outbreak a “pandemic” and urged countries across the world to take precautionary measures. Covid-19 has spread to 213 countries and territories around the world and infected more than 31,405,983 people with 967,505 deaths and 22,990,260 recoveries. In South Asia, India has reported the highest number of infections at 5,557,573 with 88,943 deaths. While Pakistan has reported 306,304 confirmed cases with 6,420 deaths. Nepal has so far reported 65,276 cases with 427 deaths.

How dangerous is the disease?

The mortality rate for Covid-19 is estimated to be 3.6 percent, but new studies have put the rate slightly higher at 5.7 percent. Although Covid-19 is not too dangerous to young healthy people, older individuals and those with immune-compromised systems are at greater risk of death. People with chronic medical conditions like heart disease, diabetes and lung disease, or those who’ve recently undergone serious medical procedures, are also at risk.

How do I keep myself safe?
The WHO advises that the most important thing you can do is wash your hands frequently with soap and water for at least 20 seconds or use hand sanitizers with at least 60 percent alcohol content. Avoid touching your eyes, nose and mouth with unclean hands. Clean and disinfect frequently used surfaces like your computers and phones. Avoid large crowds of people. Seek medical attention if symptoms persist for longer than a few days.

Is it time to panic?

No. The government has imposed a lockdown to limit the spread of the virus. There is no need to begin stockpiling food, cooking gas or hand sanitizers. However, it is always prudent to take sensible precautions like the ones identified above.

Sangam Prasain
Sangam Prasain is Business Editor at The Kathmandu Post, covering tourism, agriculture, mountaineering, aviation, infrastructure and other economic affairs. He joined The Kathmandu Post in October 2009.