Thursday’s figure of nearly 3.3 million set a grim record. “A large part of the economy just collapsed,” said Ben H… https://t.co/aNB36p7Y2A
Coronavirus economic shockwave hits the APAC aviation industry
The novel coronavirus crisis has become a "Black Swan" event for the Asia-Pacific commercial aviation industry, as Chinese travel to the rest of the Asia-Pacific has collapsed due to government travel bans, forcing many Asia-Pacific airlines to temporarily cancel their flights to mainland Chinese cities until the novel coronavirus epidemic is contained.
The Asia-Pacific commercial aviation industry has become increasingly dependent on mainland Chinese tourism and business travel over the past decade. Many Asian airlines had established direct flights to second-tier and third-tier Chinese cities due to the boom in Chinese outbound tourism. As a result of the coronavirus epidemic and travel bans imposed by many governments, there have been widespread cancellations of scheduled flights between many Asia-Pacific countries and mainland China announced for February and March. Consequently, many Asia-Pacific airlines have become increasingly vulnerable to such an unpredictable "Black Swan" event where Chinese travel has completely collapsed.
Countries that have imposed stringent travel bans on visitors from China include Japan, Australia, India, Indonesia, New Zealand, Philippines, Singapore and Vietnam. However, so far Malaysia and Thailand have imposed more limited restrictions on Chinese visitors, with no overall travel ban yet. Chinese airlines are feeling the brunt of this economic shock, with their international flights to many international destinations having been heavily disrupted.
In Japan, flights from 13 regional Japanese airports to and from mainland China are being suspended due to the coronavirus epidemic, with significant reduction in flights to China from the largest Japanese international airports, including Narita and Haneda airports. In the ASEAN region, Vietnam and Indonesia have suspended all flights to mainland China. A number of airlines in the Philippines have also suspended all flights to mainland China, Hong Kong SAR, Macau SAR and Taiwan, which has further increased the negative impact on the tourism industry in those economies. Taiwan itself has introduced new travel restrictions applying to visitors from Hong Kong SAR and Macau SAR.
Fears about the spread of the novel coronavirus have also resulted in increasing cancellations of conferences and other events being held in the Asia-Pacific region, with reduced attendance for conferences that are still going ahead in Asia-Pacific conference hubs, such as Hong Kong SAR and Singapore. International business travel within the Asia-Pacific region and travel from other continents to the Asia-Pacific region have also been heavily curtailed due to the coronavirus epidemic.
The Singapore Airshow being held on 11-16 February 2020 has been heavily impacted by a number of aerospace companies that have pulled out, while the Singapore Airshow Aviation Leadership Summit (SAALS) 2020, a leading global event for the airline industry, has been cancelled. A number of Chinese aerospace companies due to attend the Singapore Airshow had to pull out because of Singapore's travel ban on visitors from mainland China. A number of other international aerospace companies from other regions, including some from North America, have also cancelled their participation in this year's Singapore Airshow.
Negative shock to APAC tourism industry
The rapid rise in household incomes in China has triggered a boom in Chinese tourist visits abroad, which have risen from 20 million in 2003 to 150 million in 2018. Consequently, the vulnerability of many Asia-Pacific economies to a complete halt in Chinese tourist visits has increased significantly over the past two decades. Thailand, Singapore, Malaysia, Vietnam, Hong Kong, Japan, South Korea and Cambodia are among the most vulnerable Asian economies to the negative economic shock from the collapse of Chinese tourism.
Thailand has been one of the most notable beneficiaries of the boom in Chinese tourism, with total annual Chinese tourist visits to Thailand having risen from 2.7 million in 2012 to 11 million in 2019. Chinese tourism spending in Thailand was estimated to have reached USD 18 billion in 2019, amounting to more than 25% of total international tourism spending in Thailand. Direct tourism spending accounts for an estimated 12% of Thai GDP, with Chinese tourism having played an increasingly important role in underpinning the Thai tourism economy.
Chinese tourism has also become increasingly important for Japan's tourism industry, with total Chinese tourist visits to Japan having reached 9.6 million in 2019, accounting for 30% of total foreign tourist visits. A key concern for Japan is also the potential risk from the Wuhan virus for tourism visits related to the Tokyo Summer Olympics in July-August 2020 if the virus has not been contained by early summer 2020.
Chinese tourism travel is also a key pillar for Vietnam's tourism industry, with total Chinese tourist arrivals having reached 5 million in 2018, accounting for one-third of total international visits.
For Singapore, mainland Chinese tourist visits have become a major part of the tourism economy, with 3.4 million mainland Chinese tourist visits in 2018, accounting for around 18% of total international tourist visits. The tourism sector is an important part of the Singapore, economy, accounting for an estimated 4% of Singapore's GDP.
Australia's tourism economy, which is already reeling from the impact of the bushfire crisis, will be badly hit by the absolute travel ban on visitors from mainland China that has been imposed by the Australian government. China has become the largest source country for international tourist visits to Australia, amounting to 1.4 million visits in the 2018-2019 financial year, or around 15% of total international tourist visits to Australia.
- Capital Markets Weekly: Emerging markets increasingly rely on official lenders
- COVID-19 recession to be deeper than that of 2008-2009
- Capital Markets Weekly: Risk of multiple emerging-market defaults increasing
- Weekly Pricing Pulse: Commodities sell off as the shut-downs continue
- Capital Markets Weekly: Market volatility to remain severe amidst flight to cash
- COVID-19 Impact Update: US GDP to plunge to -13% in Q2, unemployment approaching 9.0% by December
- Weekly Pricing Pulse: Commodities drop sharply as the global economy shuts down
- The global economy: Headed for recession