[Tokyo 1st Reuters]–The aviation industry, whose passenger demand has “evaporated” due to the spread of the new coronavirus, was a visiting professor at JF Oberlin University (Aviation and Management School) when 2021 was about to survive. Yasuo Hashimoto, who is also a senior researcher at the Institute of Management, sees. He points out that lifestyles and business practices that do not involve movement have become widespread, and even if the economy recovers, it will be difficult to return to the state before the corona. In Japan, the integration theory of the two major companies is rekindling in part, but he says that the principle of competition should remain.
His view is as follows.
According to the Organization for Economic Co-operation and Development (OECD), the global economy is expected to recover to pre-Corona levels by the end of 2009, but air passenger demand, especially international flights, has shown no signs of improvement and has not been able to keep up with the economic recovery at all. .. This is because immigration regulations in each country still restrict international travel, and it is becoming more common for businesses to substitute online conferences instead of going to the site. Naturally, each company is increasing its cash on hand. However, there is no doubt that 21 years will be a crucial moment for survival.
According to the latest outlook of the International Air Transport Association (IATA), the number of air passengers in 20 years will decrease by about 60% from 19 years before Corona to 1.8 billion, and in 2009 it will recover to 2.8 billion, but about 19 years. Expected to decrease by 40%. The average cash on hand of each company at the end of the first half of this year is expected to run out in 8.5 months, and it is predicted that some companies will go bankrupt in the first quarter of 2009.
Although it is expected to return to the level of 19 by 2012, there are many uncertainties and it is possible that it will fall significantly.
As the infection continues to spread worldwide, it has been decided to suspend the tourism demand stimulus measure “GoTo Travel” in Japan. JAL estimates that international passenger demand will return to 25-45% before Corona and 72-87% for domestic flights at the end of this fiscal year. ANA expects a recovery of 50% for international flights and 70% for domestic flights, but uncertainty is becoming stronger.
Qualitative changes in the passenger demand structure are also inevitable. Companies that have learned the lessons from the corona epidemic will continue to promote online conferences, telework, and partial domesticization of the supply chain, assuming the return of an infectious disease pandemic (global epidemic) from the perspective of crisis management. Will pursue a business model that does not depend on the movement of people.
In anticipation of changes in the demand structure, ANA Holdings and Japan Airlines (JAL) have begun to utilize low-cost carriers (LCC). The LCC business model is resistant to event risk and can be evaluated as the correct strategy for Corona.
The first aim is to accurately capture the leisure and personal demand that will recover first. Also, due to the economic downturn, customers will choose cheap flights.
Fixed cost outflows are smaller for LCCs than for major airlines and can withstand predicament longer. Thorough hygiene management to prevent infections may increase operating costs and reduce short-time return operations (which is the LCC’s revenue model), but LCC’s strength is that it can efficiently carry many passengers with a small number of personnel. I think I can demonstrate it.
Even if passenger demand returns to the level of 2019, business demand for international flights will tend to decrease due to the restraint of business trips by companies. In that case, the yield (the unit income per kilometer per passenger) will decrease, and the business income will decrease. Lower yields hurt big players, but they work in favor of low-cost LCCs.
The aviation industry also has the challenge of addressing environmental issues. Airplanes originally emit a large amount of carbon dioxide (CO2), and are being criticized by environmental groups. In Europe, it is sometimes called “jumping shame”. In the United States, President-elect Joe Biden, who is focusing on environmental policy, is supporting the expansion of railways, and the movement to “high-speed railways, not airplanes” may intensify worldwide.
Considering the image of environmental friendliness from institutional investors and consumers, it is possible that general companies will curb the use of airplanes. The French government has added a green policy to the conditions for public funding to Air France, and has also indicated that it will abolish domestic short-haul routes that compete with railroads.
Taking the opportunity of Corona, the integration theory of ANA and JAL is rekindling. In particular, there are opinions that international flights should be integrated into one company, but major airlines have both domestic and international flights and have a network that connects them. Above all, full-time international flights are too vulnerable to event risk. If ANA and JAL were dedicated to international flights, they would have gone bankrupt due to the corona wreck.
In fact, Singapore Airlines, which is dedicated to international flights, is in crisis, and the Singapore government is providing a huge amount of support of over 1.2 trillion yen through a government fund. The same is true for Cathay Pacific in Hong Kong.
Due to the rivalry between the two companies, not only the price but also the service is being refined. It is better to keep the principle of competition.
Interviewer: Maki Shiraki
— .
