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IATA projects US$27.8b revenue loss for carriers in Asia-Pacific region

IATA projects US$27.8b revenue loss for carriers in Asia-Pacific region

Monday, February 24, 2020

GENEVA — IATA says its initial assessment of the impact of the coronavirus outbreak shows a potential 13% full-year loss of passenger demand for carriers in the Asia-Pacific region.

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, says IATA. That would translate into a US$27.8 billion revenue loss in 2020 for carriers in the Asia-Pacific region, with the brunt of the loss carried by carriers registered in China, with $12.8 billion lost in the China domestic market.

In the same scenario, carriers outside Asia-Pacific are forecast to bear a revenue loss of $1.5 billion, assuming the loss of demand is limited to markets linked to China.

IATA says this would bring total global lost revenue to $29.3 billion and represent a 4.7% hit to global demand.

IATA is basing its estimates on a scenario where the coronavirus has a similar V-shaped impact on demand as was experienced during SARS – characterized by a six-month period with a sharp decline followed by an equally quick recovery.

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

The estimated impact of the coronavirus outbreak also assumes that the center 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,” says IATA.

The organization notes that “we don’t yet know exactly how the outbreak will develop and whether it will follow the same profile as SARS or not. Governments will use fiscal and monetary policy to try to offset the adverse economic impacts. Some relief may be seen in lower fuel prices for some airlines, depending on how fuel costs have been hedged.”

Adds Alexandre de Juniac, IATA’s Director General and CEO: “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 and other public health authorities to keep passengers safe, the world connected, and the virus contained. 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 SARS crisis of 2003. And that scenario would translate into lost passenger revenues of $29.3 billion.

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“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.”

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