The aviation industry has faced a challenging market in the last few quarters, from the grounding of the Boeing 737 MAX last year to the COVID-19 outbreak at the beginning of this year. These unpredictable events have significantly impacted the outlook for the industry in the short-term.
To explore the effects of these events on Aviation in Asia Pacific, Page Executive recently held discussion panels in our offices in Hong Kong and Singapore. Top leaders in the industry discussed the COVID-19 virus, the global supply chain and the hiring outlook for 2020 and beyond.
While more negative current events dominate most conversations, the overarching sentiment is that Aviation in Asia Pacific is resilient. These are some of the insights from our expert panel.
COVID-19 is affecting the industry – but it will bounce back
Both Singapore and Hong Kong have been on the frontline in dealing with the spread of the virus outside of China. Predictably, this has affected the aviation industry through travel restrictions, an overall decrease in passenger volume and bottlenecks in the supply chain. Though this is causing an immediate slowdown, most industry experts see this downturn as a V-shaped problem and expect long-term effects to be minimal in the context of the bigger picture.
John Timpany, Tax Partner, KPMG at the Hong Kong event said, “We've been seeing growth in the industry, demand for aircraft and all the auxiliary services that go with that. We have a bit of a shock at the moment, which is leading to some consolidation or people reconsidering their positions, but overall there’s a long-term growth with a bit of short-term volatility.”
In Singapore, Andrew Beer, Managing Director Aviation Finance for Standard Chartered Bank noted a positive forecast for the industry. “Initially, the 2020 forecast we are looking at a profitability for the industry as a whole of 29.3 billion, that’s on the back of an estimate of 25.9 billion for 2019.”
The importance of cash flow
The biggest impact of COVID-19 from a financial perspective has been on cash flow. James Bradley, Partner at K&L Gates explained that cashflow is paramount for companies. “Airlines are certainly looking at cash flow, debts and loans. From a lessor perspective, many airlines are asking for different terms within leases and amendments to repayment clauses. The bottom line is that those with issues with cash flow are struggling right now.”
A global, diverse supply chain is key
When tackling the subject of whether there will be a long-term impact on supply, especially from China, the panel in Singapore noted that dynamics within the supply chain are changing. However, not all changes are due to the virus.
Beer said, “Beyond COVID-19, the supply chain is being affected by changes in the geo-political situation, particularly between China and the US. To protect against possible effects from ongoing trade wards, companies should invest in multiple, diverse supply chains to protect their supply.”
Use a long-term lens when making decisions
Overall, our panels stressed that it is important to keep a long-term view when making business and forecasting decisions. For example, with the Boeing 737 MAX grounding, Beer noted, “Airlines and lessors struggle with orders because you have to predict demand 5 years from now. Companies should be careful when considering cancelling orders because there will be a rebound soon, and we all want the 737 MAX back in the sky.”
In Hong Kong, Dewey Yee, Lecturer MSC Aviation Finance and Leasing, Hong Kong Poly University noted: “I've been in this industry for 34 years and the industry has always experienced a lot of shocks in the market, whether it's SARS, the Gulf War, 911 and on. However, if you look at the chart, it’s a continuous upward trend, and the reason is high demand. I don’t see any long-term ill effects. I think it will come roaring back. A lot of people are very anxious to catch up and overtake last year, so I’m very very positive.”
Demand for hiring in APAC remains strong
Even with the difficulties in APAC, demand for hiring and the outlook for professionals within Aviation remains steady and strong.
Ben Wainwright, Associate Partner – Head of Aviation and Professional Services, Page Executive stressed the importance of people in the hard times “You need the best human capital to deal with challenging markets. The strategic importance of APAC has never been greater.”
Across the panel, it was agreed that hiring demands remain stable and companies in the industry are still very much seeking out top professionals. If anything, current events have highlighted the importance of experienced, versatile professionals in leadership roles within organisations.
Bradley explained further. “We are still hiring on the same level as before, but we need professionals with more diverse experience. While before the trend was to hire specialists who have done one thing for 15 years, now, the versatility of the market requires people who are able to perform at a variety of levels.”
Within aviation, aircraft leasing remains strong in terms of demand, as airlines move aircraft around to cover varying needs in response to the market. Especially in APAC, mid to end of life lessors have high demand for hiring and recruiting the right professionals.
At the senior level, particularly in Singapore, there is a high demand for high-quality candidates within leadership roles. Sales and Marketing, Technical, Risk, Banking and Legal will continue to produce the highest number of open roles.