What regional airlines must do to turn around

With the air travel industry hit hard by Covid-19 and with higher than average increases in the price of tickets, it is not surprising that the airline industry is facing its biggest challenge in two decades since the events of 911 changed the landscape of air travel that put the tourism industry in a tailspin.

Despite the gloomy forecasts, there can be a turnaround to pre-Covid-19 levels, provided the necessary measures are in place. For this, Malaysia needs to continue to work and engage with the relevant stakeholders.

Undoubtedly, the data makes for grim reading. The International Air Transport Association (IATA) stated in April that its 290-member carriers were heading for a combined historic net loss of more than US$84 billion (RM357 billion) in 2020 as a consequence of the impact of Covid-19 and the concomitant of movement controls and restrictions.

As for Malaysia, the air passenger industry could see a 39% fall in demand, involving an estimated 25.49 million passengers. IATA said the country’s airline industry faces an estimated RM14.4 billion loss in revenue, affecting some 169,700 jobs.

Malaysia Airports reported a staggering 97.8% contraction in passenger traffic movements in May compared to the same period last year. Internationally, the decline was 99.3% whereas the domestic sector shrunk by 96.4%.

Basically, there are two scenarios here.

The first is the pessimistic view which posits the recovery of the airline industry as uncertain and not guaranteed. The data highlighted above would seem to preclude a quick turnaround and, therefore, recovery will take a long time to set in.

The second is the optimistic view whereby the future of the airline industry is tied to the duration of Covid-19, signalling a new dawn for the airline industry with standard operating procedures (SOP) such as social distancing that could be relaxed or even abandoned altogether once a vaccine or drug is ready for use.

In fact, there are already signs that the optimistic view is taking place – recovery is well on the way, albeit rather gradually driven mainly by short-haul flights or destinations.

The recovery movement control order (RMCO) has been pivotal in this regard. Low-cost carrier AirAsia Group Bhd launched an unlimited pass promotion blitz from June 11 to 13. The pass is priced at only RM399. Pass holders can redeem unlimited flights across 16 destinations within Malaysia, with the expiry on March 31, 2021. Over 12,000 flights have been redeemed within the two-day campaign which was extended to June 15 in response to the overwhelming demand.

According to Malaysia Airports Group CEO Mohd Shukrie Mohd Salleh, since the RMCO, the average number of daily flights, including to international destinations, had increased from 97 to 122, an increase of 15%.

Regardless, both scenarios have one thing in common – some kind of standard SOP, however minimal, would have to be put in place for a long while.

Arguably, the optimistic view is the more realistic, since Covid-19 has not destroyed but merely temporarily disrupted globalisation and caused a setback to travelling outside of one’s borders.

In fact, although a rebound is not in view in the short-term on the one hand, allowing a meltdown in air travel is inconceivable on the other, with all the economic, commercial, financial and social implications.

Going forward and beyond domestic air travel, our government has broached the topic of reopening the airline industry via green corridors or bubbles outside of our borders with countries that are considered safe for travel.

These refers to reciprocal lanes or routes to and from countries that have more or less contained the Covid-19 outbreak successfully and ready to open up their borders again.

For a start, Malaysia is pushing for the resumption of intra-Asean travel. In an online forum organised by the Federation of Asean Travel Associations (FATA) on June 20, secretary-general of the tourism, arts and culture ministry Noor Zari Hamat said there was a need to focus on intra-Asean travel as international tourism from medium and long-haul destination markets would take a longer time to recover.

He believes intra-Asean is the best bet for the region to restart the tourism industry post-Covid-19.

Reverting to normalcy and easing travel restrictions would then, like a centrifugal force, progressively push outwards to the next orbit and outer layer, for example the wider Asia-Pacific region (such as East Asia and Australasia) and so on.

Of course, this requires consensus and within the context and framework of the green bubble. Singapore, for one, is currently against full resumption and opting for a step-by-step approach.

Resolving the impasse would require compromises and resolve on all sides and a common Asean protocol which is crucial and critical for also preparing for the possibility of future pandemic outbreaks.

This means the move towards a virtual (which is not the same as unhindered) free movement of people, that is facilitated by digitalisation in tandem or parallel with the deployment of electronic customs.

What this also means is there must be some sort of protocol alignment and convergence within Asean for the intra-regional travel driven by digital technologies such Internet of Things, artificial intelligence (AI), Big Data, and even blockchain or distributed ledger technology.

A common regional database of air passengers that is seamless and readily connected to track and trace apps and easily accessible by the relevant players in the air travel industry is needed. Biometric and fingerprinting ID and RFID (radio frequency identification) embedded in tickets, for example, should be introduced and promoted.

In short, easing of movement and travel restrictions – domestically and beyond – should be accompanied by a level playing field for all the countries and players involved as enabled by digital technology.

Jason Loh Seong Wei is head of Social, Law & Human Rights at EMIR Research, an independent think tank focused on strategic policy recommendations based on research.

The views expressed are those of the author and do not necessarily reflect those of FMT.

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