facebookHi, could someone please explain the potential implication and impact of COVID-19 pandemic has on the aviation sector, in simple terms? - Seedly

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Anonymous

02 May 2020

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Hi, could someone please explain the potential implication and impact of COVID-19 pandemic has on the aviation sector, in simple terms?

I read an article regarding to the SIA shares that was posted recently but I have difficulty in comprehending the pointers covered:

https://blog.seedly.sg/singapore-airlines-sgx-c...

I would really appreciate if someone with the relevant knowledge can elaborate on this matter.

Thank you!

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In the airline industry, a huge portion of the cost comes from jet fuel (naptha or kerosene), which is derived from crude oil. Crude oil is a natural resource that is used widely, from energy production to making household products, and the price fluctuates base on demand and supply. If price of oil drops, good for them, if it shoots up then it's bad news. Since the cost vary widely and unpredictable, some avoid investing in this industry.

https://blog.seedly.sg/singapore-airlines-sgx-c...

Significant Capacity Cuts

Capacity here refers to the amount of planes available for operation. A huge capacity cut would mean lesser income since the company is not able to transport as many people to places with lesser planes used.

Price Competitive Industry

There are many price comparison websites to filter out the cheapest airline ticket. The airline have to set their price very low in order to attract customers and their income will be low. This is unlike the petroleum gas at home used for cooking. Even if there is a price increase, you will still buy it in order to cook.

Need for Modern Fleet

The airline needs to buy new planes (which cost a lot) to replace older ones. Type and age of plane is also a consideration for some when they choose to fly.

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