Revenue Of Global Airlines Could Be Hit By $30bn Due To Coronavirus Outbreak

The global airline industry body has issued a warning of a total loss of about $29.3bn in revenue for the current year because of the outbreak of the coronavirus.

This year, there will be a drop in the demand for air travel for the first time in more than a decade, predicted the International Air Transport Association (IATA). And the majority of the impact of the drop in demand is expected to be taken by airlines in China and other parts of the Asia Pacific region, the industry body said.

This prediction was based on an assumption following airlines across the world cutting down on flights because of the virus outbreak.

According to the forecast of the IATA, a total loss of revenues of about $27.8bn in total is expected to be faced by airlines in the Asia Pacific region while total revenue loss of $1.5bn is likely to be faced by those outside Asia for the current year. A total revenues loss of about $12.8bn in their home market alone is expected to be faced by carriers in China alone, the IATA predicted.

“Airlines are making difficult decisions to cut capacity and in some cases routes,” said IATA’s director-general Alexandre de Juniac. “This will be a very tough year for airlines.”

But these figures as estimated now are not sufficient to estimate what the impact this would have on the profitability for the airline industry for the entire year, the IATA has also cautioned.

The basis of calculation of the current figures is the estimates made by the IATA on the drop in demand for air travel that was witnessed during the SARS outbreak in 2003, the industry body said. It noted that during the SARS outbreak, there was a sharp decline in air travel demand for a period of about six months while there was also a very sharp recover in the demand as well. The SARS epidemic in 2003 had resulted in a 5.1 per cent drop in the demand for airlines in the Asia-Pacific region for the entire year. The IATA forecast is also based on the assumption that the virus outbreak will be contained within China. The industry body however warned that the impact to the global airline industry will be far worse if the virus is not contained and spreads o neighboring countries in the Asia Pacific region.

The Asia Pacific region had been previously identified by the IATA be the driver of the growth of the global airline industry for the period between 2015 and 2035. It had predicted that Asia will have four out of the strongest demand markets in that period for the airline industry.

Warnings of a major hit to their revenues because of outbreak of the coronavirus hitting demand for air travel in Asia were issued by two major airline groups on Thursday.

Australia’s Qantas warned that its revenues for the period between Februaty and April this year could be hit by as much as 150m Australian dollars or $99 million because of the outbreak while a hit of up to €200m or $213 million because of the outbreak was predicted by the European carrier Air-France KLM.

(Adapted from BBC.com)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s