Southeast Asia’s aviation sector continues to brace against tough headwinds as persistent lockdowns and COVID-19 infections in the region thwart domestic travel plans and pushes back timelines for resumption of international air travel.
This comes at a time when travelers in much of Europe and the US are embarking on trips during their summer holiday season. Yet, Southeast Asia’s recovery seems to lag, with some countries in the region imposing stricter measures to curb the spread of infections.”It seems that there are not much changes in the fundamental aspects. The aviation industry is still not looking promising in Asia and its vaccination rate is still lagging behind Europe,” a Singapore-based market participant said July 8. “Only the western countries are supporting the jet [fuel] market…only see the number of flights increasing there.”
Another trade source echoed a similar bearish sentiment. “Demand in Southeast Asia is not looking good, I am hoping that once the Singapore-Hong Kong bubble is in place, it will provide some support for the jet [fuel] market.”
Singapore imposed stricter COVID-19 related curbs from May 16 to June 13 although some of these restrictions have been relaxed and will further ease from July 12.
In a local media report on July 5, Singapore’s finance minister Lawrence Wong said the city-state has to be cautious in reopening its borders prematurely before reaching sufficient vaccination levels, as it could lead to another wave of infections.
Meanwhile, the Singapore Airlines Group, just like many other airlines, continues to bear the brunt of the COVID-19 devastation.
The SIA Group’s passenger traffic grew on the back of a calibrated increase in passenger capacity over the past 12 months, which saw its passenger capacity rise to around 27% of pre-COVID-19 levels by May 2021, it said in its latest monthly operating statistics. The airlines covered only 49 destinations, including Singapore, as of end-May.
Also in May, Singapore Airlines and SilkAir carried 101,700 passengers. This is positive compared with about 9,000 passengers carried in May 2020, but falls drastically short of the 1,807,300 passengers carried in May 2019.
According to the International Air Transport Association’s statement on July 7, Asia-Pacific airlines’ international traffic fell 94.3% in May this year from May 2019, fractionally worse than the 94.2% drop registered in April 2021 versus April 2019.
Dark clouds lingerMalaysia has been under a nationwide lockdown since June 1 and remains so as it battles an acute wave of the pandemic.
In Vietnam, Ho Chi Minh City has also been ordered into a lockdown, state media reported on July 7, as the city struggles to contain Vietnam’s most serious COVID-19 resurgence so far.
Indonesia has also seen a sharp uptick in COVID-19 cases in the last two to three weeks, with nationwide hospital bed occupancy at 75%, according to the country’s health minister on July 2. In a virtual press conference with Indonesia’s coordinating minister for Maritime Affairs on July 6, he pointed out that the government has prepared for a “worst case scenario” whereby cases may hit 40,000.
In addition, the Indonesian unit of AirAsia Group Bhd will temporarily stop all flights for a month from July 6 to support the government’s efforts to curb COVID-19 cases.
In such a grim scenario, the Phuket sandbox program, launched by Thailand, seems to offer a glimmer of hope. Under the plan, travelers are not required to quarantine in Phuket, but they must stay there for at least 14 days and can then proceed to visit other destinations in Thailand.
Jet fuel price rise capped on demand”Demand is likely to remain subdued in the near term as the resurgence of infections will dampen air traffic, with the recovery only picking up Q4 as the impact of mass vaccination begins to register,” JY Lim, oil markets advisor at S&P Global Platts Analytics, said on July 8.
Platts Analytics expects Southeast Asia’s kerosene/jet demand to rebound by 29% in 2021, but demand will still be 14% below 2019 levels, he added.
The FOB Singapore jet fuel/kerosene cash differential edged up 8 cents/b day on day to minus 39 cents/b to Mean of Platts Singapore jet fuel/kerosene assessments at the 0830 GMT Asian Close on July 8, propelled by incremental buying interest amid an open arbitrage to the US and Europe.
Industry sources, however, noted that the recent uplift was a mere temporary one and jet fuel prices will likely be capped, given the fragility in the wider downstream aviation sector.
”I feel that globally the aviation industry is still weak. We did see some sporadic demand with the reopening in US and Europe last week and early this week, and low freight rates have also helped to open the arb. But I don’t think it’s going to maintain…I’m not optimistic,” a regional trade source said.