Hana Financial Research "March Air Passenger Numbers Down 82% Due to COVID-19... Aviation Industry Structural Reorganization Expected"

[Asia Economy Reporter Haeyoung Kwon] Amid the sharp decline of over 80% in air passenger numbers last month due to the spread of the novel coronavirus infection (COVID-19), there is a forecast that industry restructuring will begin in earnest before the recovery of business conditions following the containment of COVID-19 as early as the fourth quarter.

According to the report "Analysis of Industry-Specific Impact Due to the Global Spread of COVID-19" released by Hana Financial Management Research Institute on the 11th, the combined domestic and international air passenger numbers in March recorded 1.74 million, down 82.7% compared to the previous year. This is the lowest level since statistics began in 1997.

In March, the number of package tour customers dispatched by major travel agencies Hana Tour and Modetour decreased by 99% and 99.2%, respectively, compared to the previous year. The monthly reservation rates in the second quarter, based on Hana Tour, showed decreases of 99.6% in April, 97.6% in May, and 91.3% in June. Air cargo volume decreased by only 2.2% year-on-year in February due to urgent inventory stockpiling, but in March, it plunged approximately 34% based on provisional figures.

Accordingly, domestic airlines are making self-help efforts such as restructuring, and the government is announcing measures to support the industry. Eastar Jet decided to reduce about 20% of its total employees, and Korean Air is currently promoting unpaid leave for foreign pilots and land sales.

The Hana Financial Management Research Institute predicted a recovery in business conditions as early as the fourth quarter, while also anticipating a high possibility of prior structural reorganization. Air passenger demand has shown a characteristic of rapid recovery after shocks, as seen in past events such as the US 9/11 terror attacks, the global financial crisis, and the SARS outbreak, where temporary demand decreases occurred due to external shocks.

Researcher Jihwang Ma at Hana Financial Management Research Institute said, "Before demand recovers, the domestic airline industry is likely to undergo structural reorganization such as the enlargement of LCCs through mergers and acquisitions (M&A)," adding, "Expansion of government support and the duration of the COVID-19 crisis will be major variables."