Fears that the swine flu virus would lead to a deadly global outbreak as the World Health Organization (WHO) raises flu alert level dashes hopes of a quicker world economic recovery. The airlines industry, already weakened by the global economic crisis, takes a further beating as customers are expected to cancel travel plans.
According to Frost & Sullivan Asia Pacific Senior Consultant of Aerospace & Defense Practice Haris Izmee, the impact of the swine flu to the airlines industry could be similar to the 9/11 attack in 2001 and the outbreak of the Severe Acute Respiratory Syndrome (SARS) in 2003.
“At this moment, the swine flu outbreak is serious but not a global threat – yet. The airline industry will definitely see a decline but will be able to recover when the threat dissipates. This is because the shock to the general public is not as great as it used to be in the past as we are now better prepared to face global events,” he says.
Frost & Sullivan Asia Pacific Consulting Analyst of Aerospace & Defense Practice Julius Yeo concurs, “Asia Pacific airliners have weathered SARS and emerged stronger from that crisis. Asia Pacific as a whole are better prepared to handle this epidemic crisis since there are already measures and infrastructure put in place previously to combat and contain the spreading of SARS.”
Governments around the world have taken steps to tighten monitoring of passengers at airports. Thermal scanners have been deployed to measure and monitor body temperature of airline passengers arriving at airports. Governments have also cautioned against traveling to Mexico and North America if unnecessary.
“These kinds of events do affect the airlines industry but only temporarily as airlines are a commodity service now – everyone needs to fly. However, the frequency of flying will drop for a while until the dust clears. The economic slowdown affects the business class segment the most and this will be exacerbated by the impact from the swine flu outbreak. The economy class segment will see a slight drop,” says Haris.
Haris continues, “Low cost carriers will gain benefits as customers who still have to travel are still hesitant to spend more than necessary. Also, airlines that do no fly to North America will not be affected much. Asian, European, Middle East and African airlines will not be as badly affected as their counterparts in North America.”
Yeo observes, “There are very strong fundamentals within Asia Pacific region, especially with the emergence of China to drive the growth of the airliners in the region in the future. We will see decline in passenger demand during these periods of crisis – credit and epidemics.”
“However, Asia Pacific Airliners are better prepared to handle the epidemic crisis than before. If Asia Pacific successfully shields itself from the impact of the swine flu, there will still be adequate business activities within the region to cushion the negative effect of the swine flu and support the sustainability of the regional airliners businesses. Once the crisis stabilizes, Asia Pacific airliners will be the first to pick up,” says Yeo.
Malaysian low cost carrier Air Asia has stated that it does not expect its operations to be affected by the outbreak of swine flu and will continue to grow with expansion plans on track.
“Airlines may be able to pick up again from the end of this year or in 2010 once the economy shows concrete signals of going upwards. Airlines manufacturing is already showing improvements due to confirmed future orders. Oil prices, though volatile, has been lingering around the USD50/barrel and China may possibly be the first to be out of recession,” says Haris.
He adds, “Precautions and quick responses by global governments is key to help sustain airlines and airports through the next few months. Government efficiency in controlling the outbreak will increase customer confidence and alleviate travel fears.”
Source: Frost & Sullivan
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