Flights and COVID-19

KOMPAS/TOTOK WIJAYANTO

A Singapore Airlines check-in counter at Terminal 3 of Soekarno-Hatta International Airport in Tangerang, Batnen, is empty on Monday (2/3/2020). Singapore Airlines reduced its flights to various cities, including Jakarta, amid the COVID-19 outbreak.

"Serious issues on a global scale can only be overcome when stakeholders reach a mutual agreement through dialogue and interaction on the basis of mutual trust."

That is what was said by Thus Klaus Schwab (2015), founder of the World Economic Forum. Schwab\'s statement five years ago turned out to be relevant to the current global situation affected by the COVID-19 outbreak from Wuhan, Hubei, China.

The coronavirus epidemic may have aroused our memories of the film Contagion, a thriller released in 2011 that tells of a very deadly infectious plague. The virus spread rapidly throughout the world without its causes and remedies being known. Many cities became ghost towns. Many offices, shops, malls and restaurants were closed. The death toll continues to grow, until finally the remedy vaccine is discovered thanks to the efforts of the research doctors, and the situation begins to improve.

The impact is quite serious

The national aviation industry is again facing a difficult situation. Not long after "recovering" from the impact of the US-China trade war, now comes the COVID-19 epidemic from China. Previously, the impact of the trade war had skyrocketed flight operational costs due to the fall in the rupiah exchange rate against the US dollar, which then led to long discussion over the high prices of plane tickets.

In fact, January, February and March are busy seasons for flights to and from China.

The coronavirus is spreading at a time when Indonesia-China economic relations have been quite intensive, both in terms of investment, exports/imports, and tourism. China is the third-largest foreign investor in Indonesia after Singapore and Japan. Moreover, China has also been a major trading partner since 2013, and is also the third-largest tourist supplier after Malaysia and Singapore. Therefore, it is comprehensible that the impact of the coronavirus outbreak has been quite severe, making the related sector/industry to be in limbo, especially aviation and tourism. In order to prevent the spread of the coronavirus to the country, according to WHO\'s appeal, the Indonesian government has officially stopped flights from and to China since 5 Feb. 2020. In fact, January, February and March are busy seasons for flights to and from China.

The flight stoppage is estimated to cause the frequency of national airlines flights abroad to drop 11.8 percent. The International Civil Aviation Organization estimates that the impact of the coronavirus outbreak will make the world aviation business lose revenue of US$4 billion-$5 billion. Garuda stopped flight operations to China as of 5 Feb. 2020 and must return (refund) tickets that have been sold for the period from 4 Feb. to 31 March 2020, namely 34,594 pax relations with Beijing, Shanghai and Guangzhou. Several other national airlines, namely Citilink, Batik Air, and Lion Air, even more quickly stopped flights to and from China, namely on 2 Feb. 2020. Citilink lost around Rp 55 billion because it had to refund revenue from aircraft charter for the period between February and March. Sriwijaya Air has ceased operations since 31 Jan. with potential losses from aircraft charter worth $5 million.

KOMPAS/TOTOK WIJAYANTO

The situation at Terminal 3 of Soekarno-Hatta International Airport, Tangerang, Benten, on Monday (2/3/2020). To anticipate sluggishness tourism due to the new coronavirus, the government is offering 50 percent discounts on plane tickets to 10 tourist destinations in Indonesia from March to May.

The absence of passengers (travelers) from China caused three international airports, namely Ngurah Rai, Sam Ratulangi, and Hang Nadim, to increasingly be quiet. At Batam International Port, the number of passengers dropped 50 percent, especially on weekends, due to the coronavirus issue.

Three tourist destinations, namely Bali, North Sulawesi, Batam/Bintan, are immediately the most affected areas due to temporary disconnection of air transportation with mainland China. In Bali, a number of hotels experienced large-scale international cancellations of MICE (meetings, incentives, conventions, exhibitions). Likewise, a number of tourist attractions and souvenir merchants whose buyers are Chinese tourists are lack of visitors.

In Manado, the occupancy rate of five-star hotels dropped dramatically. In Bintan, several resorts and tourist attractions, including Bintan Black Coral and the firefly mangrove forest, were forced to close operations since late January. Thus far, Chinese tourists dominate the tourist spots. As a result, the fishermen supplying fresh fish to the resort are losing money. For Bali alone, hotels and restaurants are estimated to potentially lose Rp 2.7 trillion from Chinese tourists from January and February. Of the total number of foreign tourists visiting Indonesia 16.1 million (2019), as many as 2.07 million were from China; and out of the 6.3 million foreign tourists to Bali in 2019, as many as 1.16 million were from China. Nationally, the potential for loss of foreign exchange from tourism in a year reaches Rp 40.7 trillion.

Indonesia Incorporated

Simply after only five days of the stoppage of flights to/from China, two water sports business units in Tanjung Benoa, Badung, Bali, have laid off hundreds of employees due to lack of visitors. The same things also happen on several resorts and tourist attractions in Bintan where some of the employees have been laid off since the end of January.

The layoff move is certainly not expected to be a trend in responding to business losses affected by the coronavirus spread prevention policy. All stakeholders must work hand-in-hand, including through the "mutual cooperation" (gotong royong) move as a traditional solution for the Indonesian people in order to minimize the impact of business decline due to temporary disconnection of air transportation with China regarding Covid-19 and prevent layoffs in the aviation and tourism industries, especially by airlines and hotels.

The mutual cooperation between stakeholders in the Indonesia Incorporated is very important. Social capital is needed to overcome shared problems.

The mutual cooperation between stakeholders in the Indonesia Incorporated is very important. Social capital is needed to overcome shared problems. The mutual cooperation is a form of social capital that is unique to our nation. The solution in the framework of Indonesia Incorporated, more or less, certainly requires sacrifice, both from the government and related business entities/entrepreneurs. Even, if necessary, solutions involve aviation and tourism industry workers through their associations.

KOMPAS/TOTOK WIJAYANTO

Planes are on standby at Terminal 3 of Soekarno-Hatta International Airport in Tangerang, Bentan, on Monday (2/3/2020). To anticipate sluggishness tourism due to the new coronavirus, the government is offering 50 percent discounts on plane tickets to 10 tourist destinations in Indonesia

From the government side, several policy steps can include relaxing non-tax state revenue (PNBP), increasing government MICE activities in Bali, Bintan, and Manado, as well as facilitating expansion/diversification of international aviation markets to non-China countries or maximizing other routes for switching empty flight spaces due to the absence of flights to China. PNBP relaxation can include cutting landing fees and passenger service charges, as well as discounts on airport operator office space rental rates. The government needs to increase the number of MICE activities, particularly across ministries, in hotels affected by the cancellation of MICE activities related to the coronavirus issue.

The airlines also need to provide incentives in the form of attractive discounts to Bali, Manado and Bintan, at least for the next two months. Likewise, hotels and tour/travel agents that have been dominated by Chinese tourists need to provide large discounts and cheap travel packages along with guarantees that the hotels have been sterilized from the possibility of a "trace" of the coronavirus.

Wihana Kirana Jaya, Professor at the School of Economics and Business of Gadjah Mada University; Special Staff of the Transportation Minister