IATA: World airlines to lose $30 billion this year
The International Air Transport Association (IATA) has announced that things will not be good for the global airline industry this year following the coronavirus outbreak which has threatened to completely paralyze the industry. Coronavirus has killed more than 2,800 people and infected more than 83,000 worldwide. The world’s airline association announced that its initial assessment of the impact of the Novel Coronavirus 2019 outbreak (COVID-19) shows a potential 13% full-year loss of passenger demand for carriers in the Asia-Pacific region.
This is has forced many airline companies in the Asia-Pacific region to reduce their number of flights and routes to various destinations, a revenue loss that will translate to $27.8 billion in 2020 for the carriers, with China alone losing $12.8 billion in the domestic market.
IATA forecasts a revenue loss of $1.5 billion for Airline companies outside Asia-Pacific with the assumption that the loss of demand is limited to markets linked to China. The total revenue loss would come to $29.3 billion (5% lower passenger revenues compared to what IATA forecast in December) and represent a 4.7% hit to global demand.
Basing their estimation on the impact of the COVID-19 outbreak to 2003’s severe acute respiratory syndrome(SARS) outbreak which was characterized by a six-month period with a sharp decline followed by an equally quick recovery, IATA says if coronavirus spreads more widely to Asia-Pacific markets then impacts on airlines from other regions would be larger.
“It is premature to estimate what this revenue loss will mean for global profitability. We don’t yet know exactly how the outbreak will develop and whether it will follow the same profile as SARS or not,” read a statement.
IATA has asked the governments to use fiscal and monetary policies such as lowering fuel prices for some airlines, depending on how fuel costs have been hedged in order to offset the adverse economic impacts that the virus may cause. The trade association has termed the outbreak as challenging for the global air transport industry and efforts to stop the spread of the virus must be placed as the top priority.
Airlines companies globally have been directed to follow the guidance of the World Health Organization (WHO) and other public health authorities to keep passengers safe, to connect the world, and to try and contain the coronavirus. COVID-19 has caused a sharp financial downturn on the airlines – IATA has estimated the global traffic will be reduced by 4.7%, this will translate into lost passenger revenues of $29.3 billion.
“Airlines are making difficult decisions to cut capacity and in some cases routes. Lower fuel costs will help offset some of the lost revenue. This will be a very tough year for airlines,” said Alexandre de Juniac, IATA’s Director General and CEO.
Qantas – Australian airline said the outbreak would cost it up to 150m Australian dollars ($99m; £76m), while European carrier Air-France KLM put the cost at up to €200m ($213m; £168m) for the period between February and April. Kenya’s KQ has been forced to suspend flights to and from Guangzhou (China) until further notice following the novel coronavirus outbreak.