The world’s airlines now stand to lose between US$63 billion and $113 billion in global revenue losses this year as a result of the novel coronavirus (COVID-19) outbreak, according to a new update from the International Air Transport Association (IATA).
In a release March 5, IATA said 2020 global revenue losses for the passenger business could range from $63 billion (in a scenario where COVID-19 is contained in current markets with over 100 cases as of 2 March) to $113 billion (in a scenario with a broader spreading of COVID-19).
This is a considerable increment from the $29.3 billion in lost revenues that IATA forecast on February 20, 2020, based on a scenario that would see the impact of COVID-19 largely 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, noted IATA.
The first scenario sees the limited spread of the disease, in which markets with more than 100 confirmed COVID-19 cases as of March 2 experience 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 due to COVID-19 are as follows: China (-23%), Japan (-12%), Singapore (-10%), South Korea (-14%), Italy (-24%), France (-10%), Germany (-10%), and Iran (-16%).
Additionally, Asia (excluding China, Japan, Singapore and South Korea) would be expected to see an 11% fall in demand. Europe (excluding Italy, France and Germany) would see a 7% fall in demand and Middle East (excluding Iran) would see a 7% fall in demand.
Globally, this fall in demand translates to an 11% worldwide passenger revenue loss equal to $63 billion. China would account for some $22 billion of this total. Markets associated with Asia (including China) would account for $47 billion of this total.
The second scenario foresees an extensive spread and includes all markets that currently have 10 or more confirmed COVID-19 cases (as of March 2). The outcome is a 19% loss in worldwide passenger revenues, which equates to $113 billion. Financially, that would be on a scale equivalent to what the industry experienced in the global financial crisis, said IATA.
Africa and Latin America/Caribbean regions are not included in the analysis because these regions currently have no countries with at least 10 COVID-19 cases.
IATA said that the significant fall in oil prices since the beginning of the year could cut costs up to $28 billion on the 2020 fuel bill, which would provide some relief but not significantly cushion the impact COVID-19 is having on demand.
“The turn of events as a result of COVID-19 is almost without precedent. 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 $63 billion revenue loss, or a broader impact leading to a $113 billion loss of revenue, this is a crisis,” said Alexandre de Juniac, IATA’s director general and CEO.
“As governments look to stimulus measures, the airline industry will need consideration for relief on taxes, charges and slot allocation. These are extraordinary times,” added de Juniac.
Meanwhile, no estimates are yet available for the impact of the disease outbreak on cargo operations.