PH transport, supply chain industries reel from coronavirus impact

Lower House Committee on Transportation hearing on the effects of COVID-19 to Philippine transportation
Lower House Committee on Transportation hearing on the effects of COVID-19 on the Philippine transportation industry

The global outbreak of the coronavirus disease (COVID-19) is adversely affecting the Philippine transportation industry, leading to cancellations of hundreds of flights, drops in ship calls, and reduction in cargo volumes and passenger traffic for both sea and air.

In a February 19 hearing of the Lower House Committee on Transportation on the effects of COVID-19 on the transportation industry, Civil Aeronautics Board (CAB) executive director Carmelo Arcilla said airlines are seeing a downtrend in bookings and a higher percentage of no shows and passengers seeking refunds.

In an interview with PortCalls after the hearing, Arcilla said fewer flights to China, Hong Kong, Macau, and Taiwan are cutting cargo volume.

The effects of COVID-19 are felt not only in tourism but across various sectors of the economy, including manufacturing and labor, he said.

The supply chain, he explained, is taking a hit with some sectors already experiencing a shortage in raw materials, disrupting production.

To prevent the entry of the coronavirus, the Philippine government has imposed a travel ban first on China, Hong Kong, and Macau. It then expanded but later withdrew the travel ban on Taiwan.

Flight declines, cancellations

Manila International Airport Authority (MIAA), which operates the various terminals at Ninoy Aquino International Airport, reported that flights to China have declined by 37 for arrival and 63 for departure. In terms of passengers, arrivals have dropped by 8.3% or 266,000 passengers, while departures have gone down by 8.9% or 370,000 passengers.

Mactan-Cebu International Airport Authority (MCIAA) said weekly flights to China, Hong Kong, and Macau from Cebu have dipped to 14 flights from 42 to 50 flights previously, with only Cathay Pacific still in operation.

At Clark International Airport, weekly flights have decreased to 731 from 782, while passenger traffic dropped by 29%.

Philippine Airlines (PAL) said it has so far cancelled more than 700 flights, affecting 150,000 to 160,000 passengers.

Cebu Pacific has temporarily cancelled 16 routes affecting 145,000 passengers and said P30 million to P40 million may have to be refunded up to end-March.

Cathay Pacific has reduced its flights at NAIA to 21 from 49 and suspended flights to Davao and Clark airports. The airline has kept its twice-a-day flights at MCIA.

Air carriers’ recommendations

Roberto Lim, vice chairman of the Air Carriers Association of the Philippines (ACAP), in a presentation during the hearing said member airlines have temporarily cancelled flights to 21 routes and cancelled 308 flights per week from February to March, which will affect 293,000 passengers until March.

Lim noted the aviation and travel industry supports 1.2 million jobs and contributes US$10 billion in gross value to the Philippine economy, or 3.4% of the gross domestic product.

“Any slowdown will have an impact on the overall performance of the Philippines,” he said.

To help airlines mitigate effects of the COVID-19 outbreak, ACAP is asking government to exclude from the travel ban some countries that already implement measures which prevent spread of the virus.

Lim said ACAP welcomes the lifting of the travel ban on Taiwan, and hopes the Hong Kong and Macau travel bans will be removed as well.

ACAP is also asking that airline crew be exempt from any travel ban as long as they do not disembark from the aircraft.

In addition, ACAP is proposing the temporary suspension or reduction of the 4% excise tax on jet fuel, a measure similarly advocated by the Thai Finance Ministry to help its aviation industry.

Lim noted this will help the airline industry, which he said is  already “losing billions.”

ACAP is likewise suggesting that “economic holidays” or three-day weekends be declared to help spur lcal and international travel.

Further, ACAP recommends abolition of the travel tax on Filipino travellers,. Lim said this tax was levied way back in 1977 primarily to deter international travel to conserve foreign exchange. Lim said the Philippines is the only ASEAN member still imposing such a fee, and its removal can spur travel demand.

Another recommendation is the waiver or reduction of airport fees and charges such as terminal, parking, rent, landing and take-off, and air navigation fees. Lim said ACAP has already submitted its recommendation on this issue to CAB, Civil Aviation Authority of the Philippines and MIAA.

Maritime fallout

On the maritime side, Maritime Industry Authority (MARINA) officer-in-charge Narciso Vingson, Jr. said a decline in sea passengers has been observed on certain routes following the ban on tourists who have travelled to China, Macau, Hong Kong, and Taiwan by local government units and shipping companies.

Routes affected include Cebu, Tagbilaran, Iloilo, Bacolod, Batangas, Puerto Galera, El Nido, Coron, Boracay, Benoni, Camiguin, Jagna, and Bohol.

Cebu Port Authority (CPA) Port Safety, Security & Environment Management Department manager Glenn Sarador said that for the February 1 to 16 period, Cebu port saw a decrease of two vessel calls and a decline of 2,361 twenty-foot equivalent units (TEU) year-on-year.

In an interview with PortCalls after the hearing, Sarador said an average of 63 ships used to call Cebu port each month, of which 20 were from China.

Philippine Ports Authority (PPA) Port Operations & Services Department director Atty. Hiyasmin Delos Santos, meanwhile, said PPA-operated ports remain open to vessels coming from China, Hong Kong, and Macau so as not to disrupt the supply chain since around 80% of cargoes entering the country are from these zones.

China is also the Philippines’ top source of imports.

Ships calling from these three areas must, however, follow certain protocols set by PPA, including boarding by quarantine officers at the quarantine anchorage and no crew disembarkation.

62% drop in Chinese volumes

Finance Secretary Carlos Dominguez III, in a separate event on Feb 19, told reporters the volume of containers from China for the period February 1 to 18 declined 62.15% to 11,050 TEUs from 29,195 TEUs during the same period last year.

He noted that while inbound shipments from China rose 8.24% to 66,828 TEUs in January 2020, container volume during the first one and a half months of 2020 slipped 14.36% to a total of 77,878 TEUs from 90,936 TEUs a year ago.

“So we’re concerned, but we believe that the slack [from Chinese imports] will be taken up in other markets,” Dominguez was quoted in several news reports as saying.

Earlier, both PPA and CPA said they expect a slowdown in ship calls and a decline in cargo volume amid the COVID-19 outbreak declared by the World Health Organization as a public health emergency of international concern.

READ: PH port agencies, stakeholders brace for coronavirus fallout on cargoes, supply chain

Other viewpoints

Several industry associations, including the Association of International Shipping Lines, Philippine Multimodal Transport and Logistics Association, and Supply Chain Management Association of the Philippines (SCMAP) also say that the COVID-19 outbreak will affect cargo volumes.

SCMAP president Christine Pardiñas, in an email to PortCalls, said they are “expecting disruption across Philippine supply chain as a result of the novel Coronavirus outbreak.”

“First, because of the recent suspension of work in China, a lot of correspondence is delayed, thus no action is taken. Also, with production in China shut down, and with a good percentage of our goods and raw materials coming from China, we anticipate a drop in the amount of cargo shipped here, which would impact our manufacturers, distributors and retailers,” Pardiñas said.

COVID-19 first emerged in Wuhan, the capital of Hubei in China, and has already claimed more than 2,000 deaths and infected thousands in many countries. In the Philippines, the Department of Health has recorded three confirmed cases while monitoring more than 500 persons under investigation. – Roumina Pablo