Airline refunds to hit P3B due to virus scare

The local airline industry is taking a multibillion-peso hit after the government ordered a ban on tourists who traveled to China as well as travel to and from the epicenter of the growing new coronavirus epidemic.

Roberto Lim, Air Carriers Association of the Philippines Inc. (ACAP) vice chair, said combined refunds could reach P3 billion over a two-month period after Philippine Airlines (PAL), Cebu Pacific and AirAsia Philippines suspended flights to mainland China, Hong Kong and Macau.

Lim, who was speaking during a Senate hearing on the economic fallout of the outbreak, said demand for air travel weakened as flyers rethought their travel plans.

“The environment is deterring people from traveling, whether they’re from China or any other market,” Lim said.

According to the Civil Aeronautics Board, foreigners who visited China in the last 14 days were barred from entering the Philippines. Moreover, Filipinos were banned from traveling to China and its special administrative regions.

ACAP’s members include the country’s three major airlines and their subsidiaries or affiliates.

Through a two-month period, the carriers are expected to cancel a total of 5,600 China flights, affecting hundreds

of thousands of passengers, Lim said.

While that was a fraction of their daily operations, the figures still represented a valuable slice of revenues given China’s growing importance as a business and tourist destination.

In the case of Cebu Pacific, the cancellations affected about 9 percent of its total flights and accounted for 12 percent of available seats.

Investors, meanwhile, have lessened their positions on aviation stocks since news of the outbreak spread.

Cebu Pacific, which is down 8.8 percent since the start of 2020, declined 3.32 percent to P80.20 a share on Wednesday. PAL Holdings Inc., which is not widely traded, rose 0.68 percent to P7.40 a share yesterday. It was down 5 percent year-to-date.MacroAsia Corp., which provides maintenance and support services for airlines around the world, dropped 5.24 percent to P9.95 on Wednesday and more than 40 percent since the start of the year.

“It’s more the fear of the unknown,” Jonathan Ravelas, BDO Unibank Inc. chief strategist, said in an interview on Wednesday.

He explained that the virus, recently dubbed COVID-19, weighed heavier on the Asian travel industry—the main source of visitors to the Philippines.

“Understandably, growing public concern about the outbreak has already had a very significant impact on demand for air travel across the region, forcing airlines to cut back or suspend services on affected routes,” said Andrew Herdman, director general of the Association of Asia Pacific Airlines.

Ravelas said it was now “wait and see” on the how much economic damage the virus would bring. He said a key factor was the ability of governments around the world to contain the spread of COVID-19.