Coronavirus outbreak to cost global airlines $29bn this year
Industry association forecasts ‘very tough year’ for carriers due to deadly epidemic
Grounded planes and travel bans as a result of the deadly coronavirus outbreak will cost global airlines almost $30bn in lost revenues in 2020, an industry body said.
Asia-Pacific carriers will shoulder the vast majority of the $29.3bn revenue fall, according to the International Air Transport Association on Friday. It forecasts a 13 per cent fall in passenger demand for the region’s airlines over the full year — the first decline in demand since the financial crisis.
“The sharp downturn in demand as a result of Covid-19 will have a financial impact on airlines — [it will be] severe for those particularly exposed to the China market . . . This will be a very tough year for airlines,” said Alexandre de Juniac, Iata’s director-general, in a statement.
The epidemic has led to fears over a global economic growth slowdown and hit demand for commodities such as oil.
Two-thirds of Chinese passenger planes have been grounded due to the epidemic. Passenger numbers in China fell to 10.21m from January 27 to February 12, a 70 per cent decline compared with a year earlier, according to the Civil Aviation Administration of China.
That has heaped pressure on Chinese airlines, including those owned by conglomerate HNA Group. “HNA was already in trouble, but [the] coronavirus is like a dagger for them. It makes it almost impossible for them to sustain their business,” said Ivan Su, an analyst at Morningstar.
Bloomberg reported on Thursday that the Chinese government was nearing a takeover of HNA prior to selling off its airline assets. HNA did not immediately respond to a request for comment.
Asia-Pacific airline revenue could plunge $27.8bn this year, with that of Chinese carriers falling $12.8bn in their home market, Iata estimated. Lost revenue at airlines outside the region is likely to come in at $1.5bn, it added.
Iata’s forecasts are based on the assumption the spread of the coronavirus follows a similar path to that of the deadly Sars outbreak in 2002-2003. That epidemic hit airline revenues for six months, but they recovered quickly.
The association said it could revise its forecasts if the rate of new infections outside of China starts accelerating. “If it spreads more widely to Asia-Pacific markets then impacts on airlines from other regions would be larger,” Iata added.
Mr Su said Hong Kong’s Cathay Pacific was particularly exposed to the outbreak. The airline, which hs had a long-held strategy of connecting China with the wider world, has been pummeled by months of anti-government protests and coronavirus has compounded those woes. The carrier’s passenger numbers plunged in January and the company warned the epidemic will “significantly” hit its financial performance.
“They have already announced unpaid leave for their staff but it could get worse for them,” Mr Su added.
US and European airlines have also cancelled flights to China, while Singapore Airlines has cut flights across its network until at least the end of May. Australia’s Qantas has reduced flights to Asia, citing weak demand.