IATA releases COVID-19 impact on demand and revenue

The International Air Transport Association (IATA) has released its initial assessment of the impact of the Novel Coronavirus 2019 outbreak (COVID-19), revealing a potential 13% full-year loss of passenger demand for carriers in the Asia-Pacific region.

As it had originally been forecast at 4.8%, the net impact will be an 8.2% full-year contraction compared to 2019 demand levels. Financially, this will equate to a US$27.8 billion revenue loss in 2020 for carriers in the Asia-Pacific region—principally China, with US$12.8 billion lost in the China domestic market alone. Carriers outside Asia-Pacific will likely see a revenue loss of US$1.5 billion, on the assumption loss of demand is limited to markets linked to China. This would bring total global lost revenue to US$29.3 billion, representing 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. The estimated impact of the COVID-19 outbreak also assumes that the center of the public health emergency remains in China, but if it spreads more widely to Asia-Pacific markets, the impact on airlines from other regions will be greater.

“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,” said Alexandre de Juniac, IATA’s Director General and CEO.

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