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Global airline business to lose billions because of coronavirus

By Philippa Larkin Time of article published Mar 6, 2020

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JOHANNESBURG - The International Air Transport Association (Iata) on Thursday said it foresaw 2020 global airline revenue losses for the passenger business of between $63 billion and $113bn as the coronavirus hits the industry.  

Many airlines were cutting capacity and taking emergency measures to reduce costs, it said.  

Iata's gloomy forecast comes as UK airline Flybe collapsed Thursday as a slump in demand for flights because of the novel coronavirus outbreak dealt the final blow to the struggling carrier.

Flybe collapsed into administration after failing to secure a last-ditch bailout from the government, leaving no other option than to ground the regional carrier serving far-flung parts of the U.K. Britain's largest domestic airline had been teetering for months, according to Bloomberg.  

Iata said: “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." 


Alexandre de Juniac, Iata’s director general and chief executive, said "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.”

It said no estimates were yet available for the impact on cargo operations.

Iata’s previous analysis last month put lost revenues at $29.3bn 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," it said.
Iata said financial markets had reacted strongly, with airline share prices have fallen nearly 25 percent since the outbreak began."

Providing some light relief, it said that oil prices had  fallen significantly -$13 a barrel Brent since the beginning of the year.

This could cut costs up to $28bn on the 2020 fuel bill on top of those savings which would be achieved as a result of reduced operations, which would provide some relief but would not significantly cushion the devastating impact that COVID-19 is having on demand.

"And it should be noted that hedging practices will postpone this impact for many airlines."

BUSINESS REPORT 

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