By Beting Laygo Dolor, Contributing Editor
The slow recovery of the Philippine airline industry took a serious hit recently after a new strain of Covid-19 forced the country to impose a new ban on inbound travelers from 28 countries last week, including the US.
Demand which slowly picked up in recent months went into a downward spiral after a new strain was discovered in the UK. It was also the first country whose nationals were banned from entering the Philippines.
The newly-discovered Covid-19 variant known as B117 is said to be some 75 percent more communicable than the original variety and is just as deadly.
The country’s two biggest airlines – Cebu Pacific and Philippine Airlines – are expected to incur greater losses “because of huge exposure in their leased aircraft,” said aviation industry expert Avelino D.L. Zapanta.
Zapanta told local media that the government-imposed ban includes “the densest air sectors of the airlines,” meaning they are the source of the highest number of travelers to and from the Philippines.
Philstocks Financial senior research analyst Japhet Tantiangco told local media the Philippine airline industry would continue to have a dismal year, backing Zapanta’s view that PAL and Cebu Pacific will suffer another year of huge payables for which “they have no corresponding means for traffic and revenue generation.”
The airlines have several options in order to stay afloat, including procuring soft loans from the government, seeking court protection from their creditors, or renegotiating longer payment terms with the aircraft suppliers.
As of last week, 28 countries were included in the ban. These include top markets: the US, the UK, Japan, Germany and Canada.
The others are Australia, Austria, Brazil, Denmark, France, the Netherlands, Hong Kong, Portugal, India, Israel, Ireland, Iceland, Italy, Lebanon, Finland, Norway, Jordan, Singapore, Sweden, Spain, South Africa, South Korea, and Spain.
The ban expires on January 15 but could be extended for an indefinite period depending on the findings on the new Covid-19 variant.
Filipinos living and working in the listed countries may still fly home to the Philippines, but they may not fly out of the country to proceed to any of the 28 nations.
Surprisingly, the Philippines was found to be one of the first countries where a carrier of the Covid-19 variant was able to leave the country unnoticed. The carrier is a 30-year-old domestic worker who had returned to her job in Hong Kong after a stay in her home province of Cagayan Valley.
PAL said at the time she left the country she had tested negative for Covid-19.
Like many of the world’s airlines, PAL and Cebu Pacific prefer to lease rather than purchase their planes as this method extends their cash outlay for a longer period. In turn, they resort to bank loans to guarantee payments for the lease.
For the same nine-month period of the previous year, PAL reported a PHP8.49 billion loss (about US$170 million), while Cebu Pacific reported a profit of PHP6.77 billion (US$135.4 million).
Airplane manufacturers can then sell the aircraft after the lease period, either to smaller airlines or to the original lessee airline.
While leisure and even business travel will not recover in the near future, analysts expect cargo to return to pre-pandemic levels this year.
The country’s two flag carriers have been suffering losses in the last four years, with last year being particularly bad for both.
PAL reported a net loss of PHP28.85 billion (US$577 million) in the first three quarters of 2020, while Cebu Pacific incurred a net loss of PHP14.69 billion (US$293.8 million) for the same period.
The drop on inbound travelers is expected to have a domino effect on the local hotel and resort industry, which was also struggling to recover lost ground due to the pandemic.