Covid-19 cuts demand inflicts losses

NEW YORK, 24 February 2020: The coronavirus Covid-19 is likely to inflict a 13% full-year loss in passenger demand according to the latest International Air Transport Association assessment.

Considering that growth for the region’s airlines was forecast to be 4.8%, the net impact will be an 8.2% full-year contraction compared to 2019 demand levels.

Globally, this scenario will inflict USD27.8 billion revenue loss in 2020 for carriers in the Asia-Pacific region with airlines registered in China, accounting for a USD12.8 billion loss in the China domestic market alone.

In the same scenario, carriers outside Asia-Pacific are forecast to bear a revenue loss of USD1.5 billion, assuming the loss of demand is limited to markets linked to China.

At a global level, lost revenue would reach USD29.3 billion (5% lower passenger revenues compared to what IATA forecast in December) and represent a 4.7% hit to global demand.

In December, IATA forecast global RPK growth of 4.1%, so this loss would more than eliminate expected growth this year, resulting in a 0.6% global contraction in passenger demand for 2020.

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 characterized by a six-month period with a sharp decline followed by an equally quick recovery.

In 2003, SARS was responsible for the 5.1% fall in the RPKs carried by Asia-Pacific airlines.

The estimated impact of the COVID-19 outbreak also assumes that the centre of the public health emergency remains in China. If it spreads more widely to Asia-Pacific markets, then impacts on airlines from other regions would be larger.

“These are challenging times for the global air transport industry. Stopping the spread of the virus is the top priority. Airlines are following the guidance of the World Health Organization (WHO) and other public health authorities to keep passengers safe, the world connected, and the virus contained,” said IATA’s director general and CEO, Alexandre de Juniac.

“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. We estimate that global traffic will be reduced by 4.7% by the virus, which could more than offset the growth we previously forecast and cause the first overall decline in demand since the Global Financial Crisis of 2008-2009.

“And that scenario would translate into lost passenger revenues of USD29.3 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,”  he concluded.

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