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Zoom won’t do long-term damage to local aviation, says S&P

written by Adam Thorn | December 7, 2020
VH-OGG Qantas Boeing 767-300 - 2142014
A Qantas Boeing 767-300, VH-OGG, shot on 21/4/2014. This model features a special Disney livery. (Craig Murray)

Credit rating agency Standard and Poor’s has said it doesn’t believe video call apps such as Zoom will inflict long-term damage to the local aviation industry.

Its latest report, called A Solid Rebound Remains Elusive, it argued, “We expect that some business travel could permanently disappear because virtual meetings and working remotely are becoming viable alternatives.

“Yet, the remote location of Australia and New Zealand and need for global connectivity mean an extended isolation is not practical.”

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S&P Global Ratings’ positive long-term prognosis comes amid its warning the next 12 months could be volatile, with a “firm recovery” not expected until late 2021.

“Given the current delay in passenger recovery, we believe airports could face strain over the next six-12 months. We will need to take into consideration the level of traffic that could ramp up during fiscal 2021, particularly domestic traffic, as well as the airport management’s or sponsor’s response to the delayed recovery prospects.”

In its previous analysis in mid-June, S&P forecast a 40-60 per cent decline in traffic for the financial year 2021, but now believes the situation could be worse due to the chances of more domestic border closures.

“We still don’t expect a meaningful rebound until fiscal 2022, when international travel could pick up and domestic traffic ramps up further. For example, governments previously discussed travel within trans-Tasman and to some north Asian countries (Taiwan, Japan, and Korea) based on these countries’ control of COVID-19.

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“Still, confidence remains fragile due to volatility caused by fresh waves of COVID-19 infections and government policy measures. A protracted recovery in traffic remains a key risk in our view.”

COVID has been the biggest crisis Australian aviation has seen. In June, the wider Qantas group said it would cut 6,000 jobs altogether, or nearly 20 per cent of its workforce, and later revealed a further 2,500 ground handling jobs could be lost.

The drastic cuts followed the business’ full-year financial results showing a loss before tax of $2.7 billion and an underlying profit before tax of just $124 million.

Virgin, meanwhile, went into administration before cutting 3,000 jobs and axing the Tigerair brand.

The director-general of the International Air Transport Association has said aviation’s recovery has “hit a wall” after new figures revealed passenger traffic has flatlined.

“A resurgence in COVID-19 outbreaks – particularly in Europe and the US – combined with governments’ reliance on the blunt instrument of quarantine in the absence of globally aligned testing regimes, has halted momentum toward re-opening borders to travel,” said Alexandre de Juniac, IATA’s director general and CEO.

Total demand in September was still down 73 per cent from the same month last year, a minuscule improvement from being down 75 per cent from August.

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Zoom won’t do long-term damage to local aviation, says S&P Comment

  • Nicholas

    says:

    I think they’ve call this one wrongly.

    Its not just zoom but cheaper and faster broadband and better plugin digital productivity tools plus the wariness of travelling and also the fact that travelling will get just plain harder to do.

    The examples instance here in this article are just a few individuals at the very top of the food chain and they’re not representative of the huge bulk of business travelers.

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