IconMarch 9th, 2020
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Airline refunds to hit P3B due to virus outbreak 

The Philippine airline industry is taking approximately a multibillion-peso hit after the government ordered a temporary ban on the tourist who traveled to China, its special administrative region, Macau and Hong Kong, and even to and from the epicenter of the growing new novel coronavirus outbreak.

The Vice-Chairman of the Air Carriers Association of the Philippines Inc. (ACAP), Roberto Lim released statements that the combined refund might reach P2 billion over a two-month course after the country’s flag carrier, Philippine Airlines (PAL), Air Asia Philippines, and Cebu Pacific temporarily suspended their flights to mainland China, Hong Kong, and Macau. Also, during the Senate hearing on the economic fallout of the outbreak, the demand for air travel weakened since frequent flyers rethink their travel plans. The current environment is discouraging people from traveling not only from China but also in any other market. The country’s three major airlines and their subsidiaries are also ACAP’s members.

Besides, the Civil Aeronautics Board of the Philippines said that foreigners who traveled to China in the last 14 days were also barred from entering the Philippines. For the Filipinos, they were banned from traveling to China and its special administrative regions previously stated.

In the span of the two months, the given carriers are expected to cancel around 5,600 China flights which will greatly affect hundreds of thousands of passengers. Yes, that was just a fraction of airlines’ daily operation but still, the figures represent a valuable part of revenues given China’s growing importance on the business aspect as well as a tourist destination.

In the case of Cebu Pacific, their flight cancellations affected over 9% of their total flights which is accounted for 12% percent of available seats. Unfortunately, for the investors, they have lessened their positions on aviation stocks for now since news regarding the outbreak of the novel coronavirus spread out globally. Since the start of 2020, Cebu Pacific is already 8.8% down and declined 3.32% to P80.20 a share. For PAL Holdings Inc, it rose 0.68% to P7.40 a share yesterday and it was down 5% year-to-date. Lastly, MacroAsia Corp., which is known to provide maintenance and support services for various airlines around the world dropped 5.24% to P9.95 which is more than 40% since the start of the year.

According to Jonathan Ravelas, The BDO Unibank Inc. Chief Strategist, it’s more the fear of the unknown. He further explained that the virus weighs much heavier on the Asian travel industry which is the main source of visitors to the Philippines.

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