February Traffic Performance was a Lead Indicator Countries in South-East Asia, with a near combined 600 million population were amongst the first to grapple with the import of infections of the Coronavirus COVID-19. Thailand and Singapore are two of the most popular tourist destinations for mainland China tourists, whilst there is substantial socio-economic and political flows with Cambodia, Malaysia and the Philippines. February was the early indicator. In fact, airports began to empty in February for early reporting air hubs such as Changi Airport (“SIN”) in Singapore and Kuala Lumpur International Airport (“KUL”) in Malaysia. Sources: CAG, MAHB Passenger traffic only totalled 3.45 million in February at Changi (SIN) airport, which was also lower than the 3.64 million recorded at Kuala Lumpur International Airport (KUL). SIN’s passenger total was 32.8% lower than in February 2019, whilst KUL’s passenger total was a still very significant 24.2% lower than in February 2019. Media reports during February were generally neutral in most of South-East Asia. Although alarm accompanied most of the reporting of the Covid-19 impact in China and surrounding North Asian neighbours such as South Korea and Hong Kong Special Administrative Region (SAR), the resultant impacts appeared to be too early to tell. In particular, parallels were drawn to the SARS epidemic of 2002 or the MERS outbreak of 2007 that had mainly affected Hong Kong SAR and to a lesser extent, mainland China and Singapore. February aircraft movements were therefore a better reflection of the overall mood emanating from authorities and media in early February. At KUL, domestic passenger traffic was 29% of the total, which tends to be more inelastic as it contracted only 20.5% YoY. This was similarly reflected in the limited 1% Y-o-Y decrease in domestic aircraft movements at KUL. This compared favourably to the 3.6% Y-o-Y decline in international aircraft movements, and the overall 2.8% Y-o-Y dip in total aircraft movements reported by KUL. The minimal 1-3% declines also reflected the difference in traffic composition at SIN, which recorded a much steeper 12.4% contraction in total aircraft movements. Aircraft movements responded less quickly than passenger traffic – as is normally the case, and in this instance, at both SIN and KUL airports. This explains the over 20%-points differential at both airports, between the declines in passenger traffic (SIN: 32.8% – 12.4% = 20.4%; KUL: 24.2%-2.8% = 21.4%) and aircraft movements. In short, passengers stopped flying more quickly than airlines could reduce flights. What about countries in South-East Asia? To understand one possible reason why other South-East Asia countries were less quick to be affected could in part be explained by the general neutrality of media reporting and governmental proclamations.

Singapore and Malaysia bit the bullet. Singapore, by far the wealthiest (but least populous except for Brunei) South-East Asian country chose an aggressive testing and quarantining methodology from early February, whilst the second-wealthiest in terms of 2018 GDP/ capita (in USD) Malaysia chose to enforce a near complete lockdown of all except essential services from 16^th March for a period of at least four weeks up to 14^th April. Singapore then announced on 3^rd April that it too would go into a similar “lockdown” from the 6^th of April for four weeks to the 4^th of May. In both instances, incidences of community spread finally convinced the respective governments to institute the lockdowns or rather economic minimalism. The mounting death tolls in Indonesia and the Philippines that triggered similar “lockdowns”. On 31^st March, Indonesia announced “Large-Scale Social Restrictions” and a “Public Health Emergency Status” decree, although it avoided the more drastic measures that Malaysia or Wuhan in China had employed. On 25^th March or less than a week earlier, despite few reports of Covid-19 infections, its main Soekarno-Hatta airport Cengkareng (CGK) had reported that traffic had dropped steadily to about 50% of ordinarily expected passenger traffic. Officially, Indonesia has reported 199 deaths and 2,273 infections up to the 5^th of April. However, and unsurprisingly, Jakarta’s mayor had on the 28^th of March already reported 283 burials following the recommended Covid-19 stipulations compared to the official death toll of 170 in the capital city. In a similar vein, the country’s doctor’s association (IDI) complained bitterly that two Hospital Directors and 12 doctors had perished from Covid-19 whilst working on the front lines. In the Philippines, despite few reports of infections and deaths, the capital city of Manila and northern region of Luzon were “locked down” on the 15^th and 17^th of March repectively for a period of about a month. According to the capital city of Manila’s main airport, Ninoy-Aquino International Airport (“MNL”), February 2020 traffic dropped 30% in passenger terms whilst flights decreased by 25%. This culminated in the closure of two of its three operating terminals at MNL from the 28^th of March. Officially, there have been 152 deaths and 3,246 infections. This may not trigger the same level of alarm as that being seen in Europe or the US, however it was sobering to note that as far back as the 26^th of March, the Philippine Medical Association reported that nine doctors had died from Covid-19 at a time when the country’s official death toll was only 38, or nearly 25% of the country’s entire death toll. The Land of Smiles is also in “lockdown”. According to the World Travel & Tourism Council (“WTTC”), the global average for employment by the Travel & Tourism industry is about 10%. In 2018, this was nearly 22% for Thailand. The Tourism Authority of Thailand reported a 44.3% decline in tourist arrivals in February 2020 compared to the same month a year ago. Whilst its main Suvarnhabumi (BKK) airport in Bangkok has not released traffic data to-date, it can reasonably be expected that there was a similar decline in passenger traffic at the airport. Thailand’s resort island of Phuket was put under a strict lockdown from the 30^th of March to curb infections, whilst businesses in Bangkok have been ordered to shut at midnight and a lengthened list of non-essential businesses have been put on a month-long closure notice since the 23^rd of March. This list has been lengthened as of the 30^th of March as infections continued to rise, although officially, there have only been 198 deaths and 2,273 infections reported to-date. Table: Covid-19 Statistics up to 5^th April 2020

Sources: John Hopkins University Research Center, World Bank, Modalis calculations Statistically, death rates of 1.06 to 1.93 per million inhabitants may not appear worrisome. Nevertheless, the ability of Covid-19 to be seemingly airborne or at least to be spread within local communities has recorded an early victim in the aviation industry. This is rightly so if we consider that passengers spend long periods of time in proximity to another both at airports and on commercial flights. Whilst the early indicators from passenger traffic at airports have ranged from over 20% to as high as 50% for South-East Asia’s main airport hubs, the impact has been more severe to airlines. Singapore Airlines has temporarily laid off 20,000 of its over 30,000 employees whilst others took an up to 30% pay-cut. Its 55% majority shareholder has affirmed its commitment to inject up to SGD15 bn (USD20 bn) in various equity and debt support to support it. On the 3^rd of April, the Singapore Government announced a separate initiative to subsidise 75% of all aviation industry employees for at least until the 31^st of December 2020, whilst the fully-state-owned airport will provide landing fee discounts and rental waivers amongst others. What next? Any return to any level of normalcy may be elusive for airlines and airports in April, as Singapore and Malaysia seem to be grappling with a second wave of infections primarily from local community incidences. It is possible that enhanced measures will be enforced, raising the cost of travel, reducing effective capacities of aircraft and airports, and therefore reducing the revenue potential of commercial activities in the aviation industry. This may yet be the best-case scenario for South-East Asia from sometime in May 2020. In such a case, it would imply a loss of at least two months of commercial activities (most of March and April), whilst it would be difficult to envision that mass travel to the US and Europe would have recommenced given the significantly higher death tolls of over 50,000 deaths and one million infections to-date and still rising. Furthermore, despite the trillions of Dollars being promised, printed and distributed to keep families fed globally, it will probably be some time before the majority of consumers will be prioritising a vacation involving air travel anytime soon. There might well be a bounce from pent-up demand closer to the end of 2020, however, it remains premature to draw any definitive conclusions at this juncture.