Airlines globally could see lost passenger revenues of between $63 billion to $113 billion in 2020, depending on the extent of the coronavirus outbreak, says IATA, as it labels the impact “a crisis”.
The association’s latest assessment is more than twice its initial estimate of lost global airlines revenues losses resulting from the outbreak, when it on 20 February estimated a likely $29.3 million hit to airline revenues globally.
The potential $113 billion passenger revenue hit is financially on par with what the industry experienced in 2009, during the global financial crisis.
In its latest impact assessment, IATA paints two scenarios — one of “limited spread” of the viarus, and another of “extensive spread”.
For the “limited spread” analysis, it took into account existing countries with at least 100 confirmed coronavirus cases. These include China, Singapore, Japan, Italy and Iran. It also estimates falls in consumer confidence in other markets in North America, Asia-Pacific and Europe.
Of the $63 billion passenger revenue hit, IATA’s assessment shows China accounting for more than a third of this. Markets associated with Asia, including China, would account for $47 billion of the total revenue loss.
In its “extensive spread” analysis. IATA has included all countries with 10 or more confirmed coronavirus cases. As a whole, Asia-Pacific will see about $57 billion in passenger revenue loss, with the bulk made up of countries including China, Japan, South Korea, and Singapore.
IATA had in its December outlook for the industry projected collective airline revenues would rise 4% to $872 billion (a figure that includes non-passenger revenues).
However, falling oil prices could go some way in cushioning the outbreak’s impact. The barrel price of Brent crude oil has fallen from almost $70 at the start of the year to around the $50 level.
IATA estimates this could lower fuel costs by up to $28 billion. It though notes this would not “significantly cushion the devastating impact” of the outbreak on air travel demand, while flagging hedging “will postpone this impact for many airlines,”.
IATA director general Alexandre de Juniac says the turn of events in recent days “is almost without precedent”.
He says: “It is unclear how the virus will develop, but whether we see the impact contained to a few markets and a $63 billion revenue loss, or a broader impact leading to a $113 billion loss of revenue, this is a crisis.”
At a media briefing held after a two-day industry workshop in Singapore, IATA chief economist Brian Pearce says it is unclear how soon the industry will rebound, especially given new clusters of transmission occurring outside of China, the epicentre of the outbreak.
“[We could see] a later recovery in Europe…and possible signs of stabilisation of domestic travel in China. It is too early to tell at this point,” he adds.
The association reiterates its call for relief measures to mitigate the outbreak’s impact, including tax reliefs, reduction in charges, as well as the temporary easing of slot allocation rules.
IATA’s latest assessment comes a day after it released data showing that passenger traffic growth slowed to 2.4% in January — the weakest monthly increase in nearly 10 years.
Revenue passenger-kilometres for Latin America and Asia-Pacific were worst hit, growing at 0.4% each. Europe showed growth by 1.6%, while the figures for Africa, the Middle East and North America were in the 5-6% range.
De Juniac warned that January’s data was “the tip of the iceberg” in terms of the impact of the coronavirus outbreak. This was because major travel restrictions in China only kicked in late-January, he notes.