Airline sees 30% revenue slump due to COVID-19

ANGELES, PAMPANGA—Budget carrier AirAsia Philippines is expecting a significant revenue hit this year as the government moves to ban travel to South Korea, a popular destination that now has the largest number of COVID-19 cases outside China.

Existing travel bans to China, Hong Kong, Macau and now parts of South Korea threaten up to 30 percent of AirAsia Philippines’ business, company CEO Ricardo Isla told reporters on Friday.

“I’m sure these next two months will still be very tough,” Isla said.

Local carriers such as AirAsia Philippines have since shifted gears and are moving to spur domestic tourism.

The budget airline slashed domestic fares by 20 to 30 percent as it strengthens destinations like Cebu, Davao and Iloilo, which continue to show strong demand.

AirAsia Philippines is also launching flights from Clark International Airport in Pampanga province to Dumaguete in the Visayas and Zamboanga and General Santos in Mindanao.

“This gives us the opportunity to add even more [domestic] frequencies. Our aircraft that used to go to China and now Korea, we have to find some use for that spare aircraft time,” said Gilberto Simpao, AirAsia Philippines chief commercial officer.

The carrier plans to end its Clark-Seoul flights by March 28 due to weak volume and not because of COVID-19, Simpao said. AirAsia Philippines serves Seoul via Manila, Cebu and Kalibo, a gateway to Boracay Island. It also has Kalibo-Busan flights.

The aviation industry faces even more challenges as some flyers, despite lower fares, shun air travel altogether in the near term.

Isla said AirAsia Philippines’ business to Taiwan has yet to recover even after the Philippines lifted a temporary ban earlier this month.

“There’s still that stigma,” Isla said. From a passenger load of about 90 percent before COVID-19, AirAsia Philippines is now handling about 50 percent or even lower in its Taiwan operations, he said.

The decline in the price of jet fuel—down about 19 percent as of Feb. 21, according to the International Air Transport Association—was also not enough to offset weaker demand.

“It helps a bit but not enough to make up for the loss of passengers. You need people to fill up the seats,” Simpao said.

The local tourism sector is bracing for uncertain times with South Korea and China the top source of visitors in 2019.

“At this point, you throw forecasts out the window. It’s an evolving situation,” Jose Clemente III, president of the Tourism Congress Philippines, said on Friday.

Clemente said that while local travel was now the main focus, the organization continues to promote the Philippines overseas. He said a Philippine delegation would attend the ITB Berlin, the world’s biggest tourism trade fair, on March 4 this year.