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By Jovee Marie N. Dela Cruz, Recto S. Mercene and Ma. Stella F. Arnaldo
SUN, sand and sea are what the Philippines boasts of. Sadly, a virus smaller than a grain of sand has brought such picturesque image into still life, literally.
According to Tourism Secretary Bernadette Romulo-Puyat the absence of frolickers to these tourism draws would likely stay for a long time.
During Tuesday’s special meeting of the House Committee on Tourism, Puyat said the effects of travel restrictions and quarantine measures of the government to address the coronavirus disease 2019 (Covid-19) pandemic would continue to be felt by the sector, as travel most likely will “not revert to normal” any time soon.
“International travel might not happen this year,” she told lawmakers on Tuesday. “At this point in time, traveling is but a dream.”
The virus and the measures adapted to address it have also pressed the pain points of the airline industry, an essential partner of the travel and tourism business.
“All this will ravage the balance sheets of many Asian carriers, who cannot reduce their fixed costs such as labor, aircraft and office space quickly enough,” David Yu, Co-Founder of Inception Aviation Holdings Ltd. told the BusinessMirror. “Fuel is the biggest cost for airlines; [but] while the fuel price has decreased in response to the situation, this is not much help if aircrafts are not flying at all.”
The numbers provided by Puyat also says it all.
PUYAT told lawmakers that revenues from foreign arrivals sank by 40.62 percent in the first quarter of the year.
She added that revenues from foreign arrivals for January to March are estimated to reach P79.8 billion, nearly half of the P134.3 billion recorded in the first quarter last year.
Puyat estimates foreign arrivals in the first quarter to hit 1.3 million, less than half of the 2.2 million recorded in January to March 2019.
The first-quarter forecast dims the milestone the Philippines reached in 2019 when tourism saw a record-high international tourist arrival of 8.3 million.
Puyat said micro-, small- and medium-scale enterprises in the travel and tourism industry are among the hardest hit by
“The magnifying effect of ECQ [enhanced community quarantine] is also felt by the communities that are highly-dependent on tourism such as Cebu, Bohol and Boracay,” she added.
Tourism Congress of the Philippines (TCP) President Jose C. Clemente III predicts “virtually no business for the remainder of the year as projections when the Covid-19 situation will improve still cannot be determined.”
A study by the National Economic and Development Authority (Neda) indicated the tourism sector would post a loss in gross value-added between P77.5 billion and P156 billion. This is equivalent to 0.40 percent to 0.8 percent of the gross domestic product, and will likely reduce the number of people employed in the sector to 56,600 from 90,400.
MUCH needs to be done to get back the record-breaking inbound arrivals the Philippines has recorded in the past.
Under the National Tourism Development Plan for 2016 to 2022, government had targeted foreign tourist arrivals to reach 9.2 million this year, from 8.26 million in 2019, while inbound tourists receipts were targeted to hit P661 billion this year, from the P482.15 billion earned in 2019.
Clemente said their main concern now is “weathering the storm” for the next several months as tourism is not expected to bounce back immediately.
“We are probably looking at a window of about 18 months to 24 months for this to get back to normalcy; maybe 12 months to 16 months with the development of a vaccine,” he said. “Business continuity is our prime concern now.”
Puyat said the P43 billion to be allocated for assistance and promotion of the tourism sector under the proposed Economic Stimulus Act is a big help to the industry.
HOUSE Tourism Committee Chairperson Marisol A. “Sol” Aragones said new standards and protocols will be implemented as part of the “new normal” in the country’s tourist industry after restrictions are lifted, hopefully, after May 15.
House Tourism Committee Chairperson Marisol A. “Sol” Aragones said the Philippine hotel industry should come up with new standards and protocols that would allow them to resume operations while preventing the spread of highly-contagious diseases including Covid-19.
“We have to learn the painful lessons of this pandemic and recognize that the old practices and previous standards applied in our hotel industry will no longer be sufficient to prevent outbreaks like Covid-19,” Aragones said. “Our priority now should be to come up with ways to make our hotels as outbreak-proof as possible.”
The lawmaker said the DOT hotel industry representatives together with the Department of Health are now determining how to best prevent outbreaks like Covid-19.
“They must review everything a hotel guest must go through, from check-in to check-out, to identify and address potential vulnerabilities and opportunities for virus transmission,” Aragones said.
ARAGONES said part of the “new normal” in the country’s tourism industry involves putting in place systems like contact-less check-ins.
She said this method could allow guests to simply get their keycards and proceed straight to their rooms.
Other methods that Aragones said hotels can use is doing away with breakfast buffets that require guests to hold the same serving spoons to get food. She said food could be served using bento, a Japanese takeaway lunch served in a box.
The lawmaker also recommended expanding hotel kitchens and instituting better spacing of tables in restaurants to allow for proper physical distancing.
“When guests becomes sick, there must be PPEs (personal protective equipment) on hand and hotel staff must be trained to immediately respond so they can properly isolate the guests until health authorities can be called in to assess the situation and determine the next course of action,” she added.
Aragones said that hotels should be able to tap into stimulus funds that have been set aside for the local tourism industry to help them implement the necessary precautions and adjust to this “new reality.”
She said that the DOT should design “model hotels” with the new protocols in place, as well as come up with information materials for both the hotel industry and tourists in order for everyone to be familiar with the standards of an “outbreak-proof” establishment.
ACCORDING to Puyat, the Department on Tourism (DOT) has come up with a Tourism Response and Recovery Program to support the industry, particularly business owners and laborers relying on it for income.
She said the program provides for the tourism stakeholders, workers and business owners the necessary means in restoring the continuity of their economic needs and business.
Puyat added it also seeks to minimize the impact of the pandemic on all stakeholders while identifying and develop special protection measures ensuring that the disadvantaged group is not adversely affected.
Likewise, she said the DOT would be implementing measures to adapt to the conditions after easing restrictions ensue. These measures include the regular sanitation of hotels, resorts, transport services, restaurants, spas, meeting venues and the like.
The DOT, Puyat said, would also regularly inspect tourism establishments. The measure calls for involving relevant agencies, such as the health department, in relations to health and safety standards.
Another measure under the program is the development of an online system that can facilitate tourism-related transactions digitally such as applications for accreditation, training and modules and retail.
Puyat said there would be capacity limits for tourism transportations, restaurants, tourist spots, such as parks and museums, and meeting conventions.
She said the DOT and the Tourism Promotions Board have waived the participation fees in international fairs and exhibitions between now and the end of 2021.
UNDERSECRETARY for Tourism Development Planning Benito C. Bengzon Jr. told the BusinessMirror the TRRP is based on the National Disaster Risk Reduction and Management Council planning guide.
The plan considers local and international best practices in tourism response and recovery, he explained.
“Consultations with stakeholders have been and will continue to be conducted as part of the needs assessment. The plan will encompass interventions in infrastructure, social services and livelihood, business continuity, strategic communications, and marketing, market and product development,” Bengzon added.
Bengzon said that aside from crafting the TRRP, the DOT was also ordered to create a program management committee.
According to Department Order 2020-02 signed by Puyat on March 30, several committees have been set up to identify projects, address bottlenecks and potential issues in certain aspects such as funding and coordination with other government agencies, with the private sector, through the TCP and its various member-groups and associations, taking an active role.
THE TCP had forwarded in mid-April its recommendations to kickstart the recovery of the industry.
In his letter to Romulo Puyat dated April 2, 2020, Clemente said, “the road ahead will be uncertain and difficult but we are confident that, in close partnership with the DOT, we will be able to gradually rise again and reassume our role as one of the prime drivers of the economy.”
Among the group’s recommendations for the short term, or until December 2020, is for the DOT to “allocate funds for the staging of familiarization trips from our major markets, continue funding marketing to the domestic market, [increase the] budget for media placements with international media networks, [and assist] the MICE [meetings, incentives, conferences and exhibitions] sector to eventually bid for events to be held in the Philippines.”
The TCP also asked the DOT to intervene to halt the Department of Transportation’s modernization program for the land tourist transportation sector, as this entails a significant amount of capital which the sector does not have right now.
The stakeholders group, likewise, urged government to expedite “low or interest-free loans” from government banks for accredited enterprises, suspend employer/employee contributions to the Social Security System and Pag-Ibig and lower rent for offices and event spaces, among others.
For the medium-term, or from January 2021 to December 2022, the TCP said it was vital to maintain as many airline routes as possible; thus, low-interest loans for airlines should also be extended to help them cope with their losses this year.
PHILIPPINE Airlines (PAL) President Gilbert F. Santa Maria listed five key points so local airlines can recover from the health crisis. These are: government support; salary cuts of senior executives; internal cost-control measures; negotiating with aircraft lessors and other suppliers to defer payment while the fleet is grounded; and banks to unfreeze credit lines.
Santa Maria said PAL has advanced the 13th month pay of its employees on April 15 for the first tranche, and the remaining half on June 15.
In a taste of what is to come to PAL, with a fleet of 98 aircraft, it plans to release 300 workers on furlough as part of a business restructuring initiative to “strengthen the company in the wake of losses sustained in 2019, aggravated by the ongoing travel restrictions and flight suspensions to areas affected by Covod-19.”
Santa Maria said the mass layoff is part of PAL’s business restructuring initiative “to increase revenues and reduce costs.”
“Other initiatives include revenue generation from an optimized route network and new ancillary products, more aggressive cost-management efforts, and investment in digital technology,” PAL said in an earlier statement.
Number of factors
PAL said it continues to be focused on managing the risks related to the Covid-19 situation, in the interest of public health and safety.
“In fulfillment of its flag carrier duties, PAL has assisted in bringing home Filipinos from affected areas via recent repatriation flights from Xiamen and Tokyo,” the carrier said.
In a letter to passengers in the last week of March, when government ordered all flights to and from the country stopped, Santa Maria said, “the challenges are immense.”
“We can only ask for the cooperation and support of all our valued customers, our partners in government and the transport and tourism industry, and our family of PAL personnel, as we devote our energies to recovery and a gradual restoration of our flights and network,” he said.
Seeing the rough road ahead, the letter said the company also has plans to resume flights, albeit in a limited ways.
“PAL’s plans are highly subject to change, depending on a number of crucial factors related to the Covid-19 outbreak such as the status of relevant travel bans and restrictions imposed by various governments and the public health and safety situation.”
SANTA Maria said PAL will resume limited flights in May.
However, he said there will still be no flights to Auckland, New York JFK, Dubai, Doha, Perth, Melbourne, Port Moresby and Sapporo.
Santa Maria said he has told employees that PAL is doing its best to survive.
“We are taking urgent action to ensure the continuity of our business while also responding to the needs of our customers and employees.”
Together with other airlines, such as Gokongwei-owned Cebu Pacific and Romero-led Air Asia, “PAL is also asking for government support similar to the assistance extended by other governments to their hard-hit airlines.”
Santa Maria said he is also encouraging employees to go on leave without pay while others with nonessential roles are placed on leave with the proper entitlements. He said they have been allowed to do so by the labor department to enable companies like PAL to deal with business interruption because of the lockdown.
Hoping for normalization
LOW-COST carrier Cebu Pacific, with a fleet of 72 aircrafts, aims to emerge from this crisis with minimal damage but cautions that the situation remains fluid.
Alexander G. Lao, Chief Strategy Officer of Cebu Pacific told the BusinessMirror last week they are still assessing their recovery plan.
“For now, we are planning for a gradual introduction of our network, but it depends on how things progress,” Lao said. “We will likely begin with the reinstatement of trunk domestic routes and, depending on travel restrictions, possibly some international markets—keeping in mind that this may be a time when only essential travel will be done.”
Still, Lao said “ultimately, while there will be a recovery, “it may take some time before business goes back to normal.”
He said since the situation is quite a dynamic and rapidly-changing scenario, “We cannot provide exact guidance.”
“But our conservative outlook is that there will be a gradual recovery and we are hopeful that things normalize by the end of the year,” Lao said.
He, however, said, “it is likely for there to be a change in travel patterns in the short-term at least.”
LAO said they continue to monitor the situation and work with relevant authorities, “as well as continuously engage with our customers, our employees and stakeholders, in order to mitigate as much of the impact of this crisis as possible.”
Asked about the carrier’s paths or strategies being considered to arrest, if not ease, a predicted recession, Lao said “the shutdown of key hubs and other countries’ travel restrictions pose a significant challenge.”
“We anticipate the possibility of additional requirements or regulations imposed on the travel industry, once the situation stabilizes and some degree of normalcy returns.”
On the other hand, Lao said he believes that CEB will be capable of adjusting its operations to cater to routes where air transport services are needed. “Looking at our financial side, we consider ourselves as one of the more conservative airlines,” he added.
Lao said that at the end of 2019, Cebu Pacific hds a cash balance of about P18 billion and a low net-debt-to-equity ratio of 1.26x.
“[These] clearly indicate the strength of our balance sheet, giving us financial liquidity and strength to face these challenging times with more resiliency.”
He said the airline’s focus at the moment “continues to be the welfare of our customers and our employees, cash conservation and ensuring our readiness for a re-start of operations.”
Playing the part
MEANWHILE, AirAsia Group said it “has temporary hibernated most of its fleet across the network.”
AirAsia Group has about 200 aircraft, composed mostly of Airbus, in its fleet.
In response to BusinessMirror’s questions about recovery plans, Air Asia said it “always places the safety and wellbeing of its guests and employees as its top priority.”
The airline said: “With governments imposing travel and movement restrictions including home quarantine orders, AirAsia is also playing its part in helping curb the spread of the virus in order to keep flying safe for everyone.”
The airline added that critical operations and customer support continues “by implementing a work-from-home scheme with a very lean rotational workforce reporting on-site.”
Air Asia said it has distributed equipment such as laptops and portable Wi-Fi devices to some of their employees to make their homes more conducive for working.
They have also been well-connected online through AirAsia’s work connectivity platform in ensuring productivity and mental wellness, the company said.
THE carrier said measures have been put in place to manage and contain costs, including a review of its annual budget and voluntary unpaid leaves among management and senior employees.
“These will help ensure that the company can ride out this prolonged period of extremely low travel demand and at the same time minimize the impact on employees.”
AirAsia said they continue “to evaluate the situation closely and is prepared to reinstate its services as soon as the situation improves, subject to the necessary regulatory approvals.”
The Air Asia Group said the current situation has proven the importance of collaboration with the government.
“This is not only in terms of the alignment of procedures in terms of how to handle guests but also operations amid this pandemic,” it said. “More importantly, both the public and private sectors have come together to address the needs of the Filipinos at this time.”
Due to subdued demand for travel in some of its key markets, Air Asia said “necessary adjustments will be made to our network to reflect consumer demand.”
The company said it “will continue its close partnership with the DOT to promote domestic travel to stimulate the tourism industry once the [public] health situation improves.”
FOLLOWING restrictions on all forms of travels, the Air Carriers Association of the Philippines (Acap) has requested government assistance for the airline industry.
The Acap—composed of PAL, Cebu Pacific, AirAsia Philippines, PAL Express and Cebgo—said the assistance could be in the form of relief on current working capital credit lines, emergency lines of credit for six months, longer term facility and waiver of all navigational and airport charges.
Addressed to Cabinet Secretaries, the letter dated March 25 said “Acap member airlines are not seeking a ‘handout’ at the expense of Filipino taxpayers.”
The group said, “What is being sought is ready access to working capital which is required to restart and sustain continued viable operations,” as it gave an assurance that the government’s financing intervention will be used for legitimate business stabilization purposes with the corresponding corporate governance in place.
Acap said the initial assistance—deferring navigational and airport charges—is no longer enough since all member airlines have shut down their passenger operations until April 14. This translates to 30,000 cancelled flights and affecting almost five million passengers, the organization said.
“With no revenue flow seen for the next several weeks or even months, Acap member airlines will urgently need government intervention,” it said.
Line of credit
RELIEF on current working capital credit lines is among the urgent government intervention local airlines are seeking.
The group said that banks have already tightened credit and cut off access to undrawn lines even without defaults on payments.
“We request government to provide a credit guarantee scheme (not cash) that guarantees the banking sector’s loans and credit lines, most of which are secured with collaterals, to remove its aversion to the poor credit risk of the airline industry under the present operating environment,” Acap said.
To enable airlines and support industries to restart operations after the lifting of the ECQ, the local carriers are also asking the government to provide access to emergency lines of credit “to help fund six months of operations, or longer, if the crisis extends.”
This is in order for the industry to remain viable until overall demand recovers, it said.
The Acap said a long-term facility at attractive rates, or a guaranty facility, would enable airlines to restructure debt to a more manageable level and give them leverage to negotiate better terms from aircraft lessors, bankers and creditors.
The group is also calling for uniformity in the implementation of aviation transport regulations in the entire country upon the lifting of the ECQ. This, they said, would ensure a quick resumption of operations domestically.
“We are partners of the government in this fight against Covid-19 and the Acap member-airlines and all of their dedicated frontliners will be ready to serve the riding public upon resumption of operations. But as partners, our member airlines will need the government support requested for herein,” the group said.
The International Air Transport Association had also written to the heads of government of 18 states in Asia-Pacific, including the Philippines, to appeal for emergency support to airlines as they fight for survival due to the dramatic loss of air travel demand.
Still a long way
THE TCP said temporarily suspending the collection of terminal fees and airline surcharges could help boost domestic travel.
The group is also urging the Philippine government to continue to promote “holiday economics,” a strategy began by the administration of Gloria Arroyo.
The TCP stressed that government can also waive the corporate and individual income taxes of accredited tourism enterprises this year, as well as permits and licenses for 2020 and 2021.
It asked for tax credits and discounts “for companies that continue to stay in operation as the recovery continues.”
The group also urged the continued availability of soft loans from government banks “so that capital expenditures are not postponed.”
Clemente stressed that while the industry is eager to welcome guests into the country again, “we still have a long way to go, and every bit of direly needed assistance from the government to help us get back on our feet, will be greatly appreciated.”
Image credits: AP/Aaron Favila