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Published on Friday, February 21, 2020

Coronavirus set to cause first dip in air travel demand in 11 years







Airline body IATA is warning that the coronavirus could cause the first drop in demand for air travel since the 2008/2009 financial crisis.

In an update today, IATA director general Alexandre de Juniac said: "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.

"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 2008-09. And that scenario would translate into lost passenger revenues of $29.3 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."

IATA says an initial assessment of the impact of the outbreak of COVID-19 shows a potential 13% full-year loss of passenger demand for Asia-Pacific airlines.

With growth forecast to be 4.8%, the net impact will be an 8.2% full-year decline compared to 2019 demand levels.

This equals a $27.8 billion revenue loss in 2020 for carriers in the Asia-Pacific region, the bulk of which would be felt by Chinese carriers with $12.8 billion lost in the China domestic market alone.

Airlines outside Asia-Pacific are forecast to suffer revenue loss of $1.5 billion, assuming the loss of demand is limited to markets linked to China.

This would bring total global lost revenue to $29.3 billion (5% lower passenger revenues compared to IATA's 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.

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