Aviation, travel take-off rests on global borders reopening

Singapore

THE recovery trajectory for Singapore's aviation and travel sectors will remain long and potentially bumpy in the short term, even as vaccines would soon be made available here. Ultimately, international travel depends on the ability of other countries to control the novel coronavirus pandemic and re-opening of their borders, observers said.

Rico Merkert, a professor of transport at the University of Sydney's business school, told The Business Times that for Singapore to get back to economically viable business activity levels as an international aviation hub, it is equally, if not, more important to get other large feeder markets vaccinated too.

"The economics of a hub airport and full-service carrier only work if you have a large number of markets served - economies of density and scale," commented the academic.

Hence, Changi Airport's recovery as an air hub depends on a coordinated global effort.

Paul Yong, aviation and transport analyst at DBS equity research, said the pace of recovery for Singapore's aviation hub is highly dependent on the ability of other countries or regions to control the pandemic. This, in turn, is dependent on the success of their respective vaccination programmes.

Further, the recovery hinges on how willing and fast other governments re-open their borders to international visitors, he added.

"The news of vaccines being rolled out in major aviation markets is a shot in the arm for Singapore's status as an aviation hub in the long-term, but in the short term the recovery trajectory will remain long and potentially bumpy...

"With many countries starting to roll out mass vaccinations in H1 2021 like Singapore, we expect international air travel to start to recover more meaningfully from H2 2021 onwards. Assuming the vaccinations start to manage the virus load well upon the roll-out of the vaccination programme globally, we project that international air travel can recover to 60 per cent of pre-covid levels by end 2021 and 85 per cent by end 2022," Mr Yong said.

In fact, his team has revised the forecast for the traffic recovery trajectory of Singapore Airlines (SIA) to 67 per cent of pre-pandemic levels by end-2021 from its previous assumption of normalisation by end 2021. This is because of the flare-ups and record high new infection cases in Europe and the United States. His team has also considered that the deployment of vaccines will take time.

Hence, it projects SIA's loss to be smaller at S$130 million for the financial year 2022 ending March 2022 from a loss of S$4.5 billion for FY 2021, before recovering to a profit of S$318 million for FY2023.

Simon Er, deputy president of the National Association of Travel Agents Singapore, when asked how soon the travel sector will recover following the availability of vaccines here, said: "It takes two hands to clap for this to get moving."

He noted how Singapore has re-opened its borders to selected countries and territories for quarantine-free visits but the arrangement has not been reciprocated.

Although he expects outbound leisure travel to be the first to pick up given the pent-up demand, he does not want to offer a guess as to when the travel sector will recover to pre-pandemic levels because the situation is so fluid.

Speaking in his personal capacity as the general manager of Global Travel, Mr Er thinks an optimistic forecast for his firm would be a recovery to 50 per cent of pre-pandemic levels in the fourth quarter next year.

Kwee Wei-Lin, president of the Singapore Hotel Association (SHA), said that as more than 90 per cent of hotel revenue is contributed by international travellers, business level will not return to normalcy immediately, certainly not within the first quarter of 2021.

The free vaccines, however, represent a huge step towards Singapore's recovery and will boost travellers' confidence, she said.

SHA appeals for government support to help defray manpower expenses in the meantime.

"Until international tourism returns, we would be most appreciative if the government can extend the Job Support Scheme (JSS) beyond March 2021. The hotel industry is working very hard towards a full recovery and to protect jobs for our workforce. However, it would be tough without government support and the JSS to alleviate the financial challenges with safe management protocols and border controls still in place," Ms Kwee added.

* More reports on Virus outbreak: Phase 3 and beyond: