Commentary: Southeast Asian airlines are falling from the sky in this COVID-19 storm

Before the COVID-19 pandemic, Southeast Asia was one of the fastest growing markets for air transport. But despite being buoyed by high demand, a deregulated airline market squeezed the profit margins of most Southeast Asian airlines, leaving them particularly vulnerable to the economic fallout from COVID-19. Southeast Asia’s "sky liberalisation" produced fierce competition between low-cost carriers and full-service carriers over the last decade. This rivalry had a revolutionary impact on airfares. But the price war that increased affordability simultaneously reduced margins, with unstable fuel costs further elevating the industry’s cost structure. With the pressure of such a business environment, airlines were already struggling to perform. The emergence of a COVID-19-induced recession has now debilitated the industry. Airlines were abruptly affected and several airlines were immediately thrown into the red as domestic and international tourist numbers collapsed. Thai Airways is in bankruptcy court with reported losses of US$564m in H1 2020. Malaysia Airlines is similarly on the brink of bankruptcy after revealing a loss of US$3.32b. Other airlines in Southeast Asia share the same destiny, with Vietnam Airlines revealing a US$284m loss, Philippine Airlines posting US$183.1m in losses and Singapore Airlines recording a loss of approximately US$538m in the first half of this year. Garuda Indonesia similarly announced US$696m in losses. The crisis is not contained to FSCs — AirAsia Group, the LCC with the biggest market share in the region, is also in the red, with losses of up to US$188m. The underperformance of Southeast Asian airlines will shape how they restructure and downsize post-COVID-19. Story has more.<br/>