Nepal | July 11, 2020

Impacts of COVID-19 on Aviation

Mukesh Dangol
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It is known a fact today that the emergence and subsequent outbreak of the coronavirus infection globally has smashed each and every sector of the world economy. The International Monetary Fund and World Bank have projected a -3 percent to -5.2 percent contraction in world GDP in 2020, far worse than during the 2008–09 financial crisis.

Majority of governments around the globe have imposed immigration controls, closed the borders, and even enforced people to stay home in order to strengthen the health care system and curb the pandemic spread. In this scenario, the most powerful tool of global connectivity, which is aviation, is no exception. It has become the first and foremost sector to be most severely affected.

The reason for this is that aviation industry totally depends upon the transportation of people and goods all over the world for travel, tourism, business and trade. The declaration of emergency, lockdown and travel restrictions in many parts of the world due to the swift spread of COVID-19 led to halting of flights and suspension of flight schedules indefinitely.

Global aviation industry includes passenger and cargo airlines, aircraft manufacturing companies, airports managing companies, Air Navigation Service Providers (ANSPs), catering and other service-providing companies, among others. Each and every component of commercial aviation have seen unprecedented impacts following these obligatory travel bans. Among them, passenger airlines have already observed severe impacts along with other service providing companies.

No doubt, the growth of commercial aviation is intrinsically linked with tourism, trade, travel and connectivity. UNWTO, a specialised agency of UN has already stated that there is a decline in international tourism receipts between USD 910 to 1,170 billion in 2020, compared to the USD 1.5 trillion generated in 2019, with 100 percent of worldwide destinations having travel restrictions. Similarly, a fall of global merchandise trade volume by between 13 percent and 32 percent in 2020 compared to 2019 has been predicted by WTO. At the moment, the global economy is depicting an unpleasant prevailing situation. Furthermore, the economic indicators don’t seem to show improvements in near future without major government and non-government interventions.

The report published by Air Transport Bureau, ICAO on June 15, 2020 clearly states that there will be an overall reduction of air passengers (both international and domestic) ranging from 46 percent to 62 percent in 2020 compared to 2019. In case of airport operation and management, an estimated loss of over 50 percent of passenger traffic and 57 percent or over USD 97 billion airport revenues in 2020 compared to business as usual has been reported by ACI.

In addition, IATA has predicted 48 percent decline of revenue passenger kilometres (RPKs, both international and domestic) in 2020 compared to 2019. These reductions and negative trends on key indicators of aviation — air traffic, passenger and cargo volumes — are certain to hamper the whole aviation system significantly. In this context, IATA in its present semi-annual report has already mentioned that 2020 will be the worst year in history for airlines (net loss of $84.3bn) and losses will continue in 2021, albeit to a lesser extent. Additionally, it has also showed an alarming situation of employment in aviation sector as 32 million jobs supported by aviation (including tourism) are at risk.

This present global aviation situation will surely have a bearing on the growth of Nepali aviation industry. Nepal being the landlocked nation depends tremendously on air transport in terms of connectivity, development and promotion of one of its most potential economic sector – tourism. In comparison with the global aviation business, the scale of current Nepali aviation is significantly smaller. However, the impacts augmented by the COVID-19 pandemic is significantly affecting previously low resilient Nepali aviation sector.

Over the past decade, governments around the globe benefitted from the solid performance of airline industry with airlines and their customers generating $111 billion per year on average in tax revenues. During the coronavirus crisis, airlines sought support from governments to help survive and overcome this period of unprecedented turmoil. As of mid-May 2020, airlines worldwide are estimated to have received $123bn of government aid (IATA).

In case of Nepal, few measures have been adopted in order to support aviation industry, especially the airlines. For instance, the provision of waiver on various fees viz: parking fees, AOC and airworthiness renewal fees, rental and late fees and Air Turbine Fuel infrastructure tax is encouraging. In spite of these, if the pandemic situation continues at the same rate and the operation of airline industry remains halted, the aforementioned waiver declared by government wouldn’t be sufficient in terms of safeguarding the Nepali aviation industry.

Governments around the world have come up with various kinds of supports including capital injections, the provision of loans, deferring the payment of taxes, reducing tax liabilities, and wage subsidies to preserve jobs. Hence, concrete package for aviation industry becomes essential.

In recent times, the financial state of Nepal Airlines Corporation has been challenging. Besides, airlines are at a delicate place in terms of financial health and investment. Not only that, huge investments in airport infrastructures such Gautam Buddha International Airport and Pokhara International Airport are at stake. As these airports are slated to be in operation very soon — by the end of 2020 and 2021 respectively — the present pandemic condition doesn’t seem to be friendly for smooth commencement of these airports.

On one hand, the operational modality of the aviation, taking into consideration health safety measures, is largely uncertain at the moment while on the other hand restoring air transport connectivity will be critical in the post-pandemic period to support the recovery of economic development. Since COVID-19 pandemic has profoundly impacted the operations of air carriers, airports and air navigation service providers (ANSPs), the decisions taken today, and in the months to come, will impact the future of the industry.

The pandemic and its consequences which has followed so far has shown us that aviation industry is currently facing the deepest crisis ever in history. Hence, international cooperation becomes key to come out of this as aviation operates on standards and standard practices through collaborative efforts in order to provide safe, secure, effective and easily available services. Government support in the form of subsidies, tax rebates and equity/capital injection, among others, along with concrete recovery plan (immediate and direct/indirect) is crucial for sustaining and reviving the Nepali aviation sector.

Mukesh Dangol is an ATC Officer at the Ministry of Culture, Tourism and Civil Aviation

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