The International Air Transport Association (IATA) now
believes the coronavirus outbreak could cost the global aviation industry up to
US$113 billion (£87 billion) in 2020 and is calling on governments to support
airlines through the crisis.
Last month IATA predicted the outbreak would cost around
US$30 billion, but it now believes it could lead to a loss of revenue of
between US$63 billion if the situation stabilises as it was on 2 March and the
higher estimate of US$113 billion in the event of the virus spreading further.
Covid-19 is now present in more than 80 countries worldwide,
hitting forward bookings on a global scale as opposed to the initially expected
downfall being confined to mainland China and Asia.
According to IATA, airline share prices have dropped nearly
25 per cent since the outbreak began – around 21 percentage points worse than
the decline that occurred during the Sars outbreak of the early 2000s.
In the best-case scenario, IATA predicts China will see an
overall 23 per cent dip in passenger numbers at the high end of the spectrum
and a 7 per cent drop in Europe (excluding Italy, France and Germany) and the
Middle East (excluding Iran) at the low end. Overall, this would equate to an
11 per cent global decrease in passenger revenue, with Asian markets accounting
for the majority of the total.
However, if the virus continues to spread and more markets
are affected by the slow-down in demand the industry is already seeing, markets
such as Austria, France, Italy, Germany, Netherlands, Norway, Spain,
Switzerland, Sweden and the UK could see a more dramatic 24 per cent decline in
passenger numbers.
While fuel prices have dropped significantly since the
beginning of the year, IATA said the savings will not be enough to relieve the
pressure on some airlines.
“The turn of events as a result of Covid-19 is almost
without precedent,” said IATA director general and CEO Alexandre de Juniac. “In
little over two months, the industry’s prospects in much of the world have
taken a dramatic turn for the worse. 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.
“Many airlines are cutting capacity and taking emergency
measures to reduce costs,” de Juniac continued. “Government must take note.
Airlines are doing their best to stay afloat as they perform the vital task of
linking the world’s economies. As governments look to stimulus measures, the
airline industry will need consideration for relief on taxes, charges and slot
allocation. These are extraordinary times.”
IATA has already called on airports and regulators to ease off
on rules around slot allocation, which currently state that airlines must use
at least 80 per cent of their slots or risk losing them in the next equivalent
season.
The impact of Covid-19 has been named as a factor in the
demise of regional carrier Flybe, which collapsed earlier this week after
failing to find extra financing.
Some analysts believe Flybe’s case could be the first of
many airline casualties as the situation across the globe continues to evolve.