COVID-19 scare likely to divert air travellers to Europe, West Asia

Under strain:Key markets like Thailand and Singapore may face further capacity cuts if COVID-19 is not curtailed.AFP

Under strain:Key markets like Thailand and Singapore may face further capacity cuts if COVID-19 is not curtailed.AFP  

They will benefit from discounts as airlines are redeploying capacity withdrawn from routes to China, say experts

Those planning international trips in the immediate future are likely to benefit from discounts for travel to European and West Asian destinations, as airlines redeploy capacity withdrawn from routes to China due to the fall in demand of destinations in the country owing to the COVID-19 outbreak, say airlines and aviation experts.

Air India and IndiGo have announced that they were extending the suspension of their flights to Shanghai, Hong Kong, Guangzhou and Chengdu into June. SpiceJet's suspension of service to Hong Kong is in place until February 27. This means airlines have surplus aircraft that need to be redeployed on other routes.

“Whatever aircraft get freed up will be deployed elsewhere. These will be mostly on domestic routes but we are also trying to put them on international routes such as Abu Dhabi, but are yet to start selling them”, said a senior Air India official.

Slump in demand

When asked whether there was a spurt in demand for destinations in the Middle East, he said there was a general slump in demand for international travel.

Another airline executive said: “While we will gain in destinations in West Asia and Europe, that will not be enough to make up for weakness on routes to South East Asia.” He added that routes to China were doing very well before airlines had to suspend them. This is despite the fact the China accounts for less than 2% of international seat capacity for Indian airlines.

This shifting of airline capacity in a season that traditionally sees poor demand means passengers may benefit from discounts for destinations such as Abu Dhabi, Dubai and Turkey.

“We have seen a 20-25% year-on-year increase in search queries to travel to Amsterdam, London, Zurich, Rome, Prague and Budapest from Chennai, Bangalore and Hyderabad this year,” said Aloke Bajpai, co-founder of ixigo.

“Capacity to Saudi Arabia and the United Arab Emirates is up. Seats to Saudi Arabia have grown 35% in Q4 of the current fiscal, as compared to the same period last financial year. Overall, the international market has grown capacity by 3%. However, the real test will be to see the passenger numbers for January once they are available”, said Lewis Burroughs, analyst at aviation consultancy ICF.

If the spread of COVID-19 is not curtailed, key markets such as Thailand and Singapore may see further capacity cuts, at which point airlines will see a much severe impact on revenue as they will struggle to redeploy capacity, cautioned Mr. Burroughs. Traffic demand into India may also see a fall.

“There will be a drastic drop in Chinese outbound tourists to European and other Asian tourist hot spots. There is a high possibility of European travellers changing their vacation destinations from Asia to Europe. This trend was observed by European carriers during past outbreaks such as SARS and bird flu”, said Abhilash Varkey Abraham, research analyst, Aerospace & Defense Practice, Frost & Sullivan.

Apart from the hit on revenue, airlines could also be impacted by delay in aircraft deliveries, as China is a key supplier of aircraft components used across Airbus family of aircraft, explains Mr. Abraham. Airbus’ completion center for its A320 and A330 models in Tianjin was closed briefly. IndiGo is the biggest customer globally of Airbus A320 neo family of aircraft. French aviation giant Safran, which supplies engines, avionics, safety and landing systems has also closed all of its manufacturing facilities across more than 20 Chinese cities.

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