Air travel set for a fall due to the coronavirus and a pandemic could prove devastating
The spread of the coronavirus will result in the first fall in global air travel in more than a decade, the international airline industry predicts and, depending on the spread of the virus, the decline could be dramatic.
The International Air Transport Association (Iata) warned that falling passenger demand as a result of the outbreak of the Covid-19 virus would cost the airline industry $29.3 billion in lost revenues this year. And that number is based on the assumption that the virus will not become pandemic.
In its initial assessment of the impact, the organization said it expected global demand for air travel to fall by 4.7% in 2020, the first overall decline since the global financial crisis in 2008-09.
“Airlines are making difficult decisions to cut capacity and in some cases routes. Lower fuel costs will help offset some of the lost revenue,” said Alexandre de Juniac, director general and chief executive of Iata. “This will be a very tough year for airlines.”The vast majority of the financial impact will hit airlines in the Asia Pacific region, where revenues will fall by $27.8 billion, with the bulk borne by carriers registered in China. Iata estimates that losses in China’s domestic market will hit $12.8 billion. Carriers outside Asia Pacific are forecast to lose about $1.5 billion this year, “assuming the loss of demand is limited to markets linked to China.”
Iata said: “The sharp downturn in demand as a result of Covid-19 will have a financial impact on airlines – severe for those particularly exposed to the China market. These estimates are based on a scenario where Covid-19 has a similar V-shaped impact on demand as was experienced during Sars. That was characterised by a six-month period with a sharp decline followed by an equally quick recovery.”
De Juniac warned that Iata’s assessment was based on the coronavirus public health emergency not spreading beyond China. “If it spreads more widely to Asia Pacific markets then impacts on airlines from other regions would be larger,” he said. “Obviously, if the virus becomes a pandemic the effect could be devastating for airlines and the entire tourism industry as well.”
Iata said it was “premature” to estimate what the revenue loss would mean for the global profitability of the airline industry. Airlines including Qantas and Air France-KLM have cancelled flights to and from China and have warned of weaker demand for travel in Asia.
Iata emphasized that