Automotive
Airlines Brace for $113 Billion in Lost Revenue From Virus
(Bloomberg) — The novel coronavirus outbreak will cost the airline industry $63 billion to $113 billion in lost revenue from passengers this year, the International Air Transport Association said as it revised an estimate for a $30 billion loss made just two weeks ago.
The scenario for a $113 billion in global revenue losses would involve the virus spreading more broadly, IATA said in a statement in Singapore on Thursday. That would represent a 19% drop from 2019 and a financial impact equivalent to what the aviation industry experienced during the global financial crisis over a decade ago, IATA said.
The organization’s previous estimate in February was based on the impact of the outbreak being 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,” IATA said.
British carrier Flybe became a high-profile industry casualty Thursday, when it said it was going into administration partly as a result of pressure from the virus. More than 94,000 infections have been confirmed globally and 3,270 people have died, primarily in China’s Hubei province, where the outbreak began.
“Airlines are doing their best to stay afloat as they perform the vital task of linking the world’s economies,” IATA Director General Alexandre de Juniac said in the statement. “As governments look to stimulus measures, the airline industry will need consideration for relief on taxes, charges and slot allocation. These are extraordinary times.”
Airlines in the Asia Pacific region are expected to be hit the hardest, with an estimated loss of about $57 billion in passenger revenues this year, IATA said. European carriers could see a combined loss of $44 billion, while for Canada and the U.S. the figure could reach $21 billion.
China has stepped up efforts to contain the damage. Indebted conglomerate HNA Group Co. is expected to be taken over and its airline assets sold, while the government is considering measures such as cash infusions and mergers to bail out the industry.
The outbreak prompted 347,414 flights to be canceled or removed from schedules from Jan. 24 to Feb. 27, according to travel-analytics company Cirium. The total includes 290,519 flights within China. But Chinese carriers are starting to restore some capacity amid signs the country is containing the spread of the virus, OAG Aviation Worldwide said.
“In little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse,” de Juniac said. “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.”
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