Passenger airline industry could lose up to $113bn due to coronavirus – IATA

The global air transport industry could lose up to $113bn in passenger business this year due to the impact of the coronavirus, the International Air Transport Association (IATA) has said.

Global revenue losses for airlines’ passenger business could range between $63bn (in a scenario where Covid-19 is contained in current markets with over 100 cases as of March 2) and $113bn (in a scenario with a broader spreading of Covid-19), a statement said.

No estimates are yet available for the impact on cargo operations.

The figures mark a significant increase from IATA’s previous estimate, issued on February 20, which put lost revenues at $29.3bn. That was based on a scenario that the impact of Covid-19 would largely be confined to markets associated with China.

“Since that time, the virus has spread to over 80 countries and forward bookings have been severely impacted on routes beyond China,” the statement said.

Financial markets have reacted strongly. Airline share prices have fallen nearly 25 per cent since the outbreak began, some 21 percentage points greater than the decline that occurred at a similar point during the SARS crisis of 2003.

“To a large extent, this fall already prices in a shock to industry revenues much greater than our previous analysis,” the statement said.

While the significant drop in oil prices could cut fuel costs by up to $28bn (on top of those savings which would be achieved as a result of reduced operations), it would “not significantly cushion the devastating impact that Covid-19 is having on demand”, IATA said. Hedging practices will also postpone this impact for many airlines.

“The turn of events as a result of Covid-19 is almost without precedent,” said Alexandre de Juniac, IATA’s director general and CEO.

“In little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse. It is unclear how the virus will develop, but whether we see the impact contained to a few markets and a $63bn revenue loss, or a broader impact leading to a $113bn loss of revenue, this is a crisis.

“Many airlines are cutting capacity and taking emergency measures to reduce costs. Governments must take note. Airlines are doing their best to stay afloat as they perform the vital task of linking the world’s economies. As governments look to stimulus measures, the airline industry will need consideration for relief on taxes, charges and slot allocation. These are extraordinary times,” he added.

IATA’s estimate of the potential impact on passenger revenues based on two possible scenarios:

Scenario 1: Limited spread

This scenario includes markets with more than 100 confirmed Covid-19 cases (as of March 2) experiencing a sharp downturn followed by a V-shaped recovery profile. It also estimates falls in consumer confidence in other markets (North America, Asia Pacific and Europe).

The markets accounted for in this scenario and their anticipated fall in passenger numbers include

* China (-23%)

* Japan (-12%)

* Singapore (-10%)

* South Korea (-14%)

* Italy (-24%)

* France (-10%)

* Germany (-10%)

* Iran (-16%)

Additionally, Middle East (excluding Iran) and Europe (excluding Italy, France and Germany) would see a 7 per cent fall in demand, while Asia (excluding China, Japan, Singapore and South Korea) would be expected to see an 11 per cent drop in demand.

Globally, this fall in demand translates to an 11 per cent worldwide passenger revenue loss equal to $63bn, whth China accounting for around $22bn. Markets associated with Asia (including China) would account for $47bn of the total.

Scenario 2: Extensive spread

This scenario applies to all markets that currently have 10 or more confirmed Covid-19 cases (as of March 2). The outcome is a 19 per cent loss in worldwide passenger revenues, which equates to $113bn. Financially, that would be on a scale equivalent to what the industry experienced in the global financial crisis.

Market	Impact on passenger numbers	Impact on passenger revenues
Australia, China, Japan, Malaysia, Singapore, South Korea, Thailand and Vietnam	-23%	-$49.7bn
Rest of Asia Pacific	-9%	-$7.6bn
Austria, France, Italy, Germany, Netherlands, Norway, Spain, Switzerland, Sweden and the UK	-24%	– $37.3bn
Rest of Europe	-9%	-$6.6bn
Bahrain, Iraq, Iran, Kuwait, Lebanon and the UAE	-23%	-$4.9bn
Rest of the Middle East	-9%	-$2.3bn
Canada and US	-10%	-$21.1bn

Revenues are base fare revenues for all airlines flying to, from and within the country.

Africa and Latin America/Caribbean regions were not included in the market-based analysis, because there are currently no countries in either region with at least 10 Covid-19 cases.