The International Air Transport Association (IATA) has released its initial assessment of the impact of the COVID-19 and finds that passenger demand for carriers in the Asia-Pacific region could fall by as much as 13%.
Considering that growth for the region’s airlines was forecast to be 4.8%, the net impact would be an 8.2% full-year contraction compared to 2019 demand levels. In this scenario, that would translate into a $27.8 billion revenue loss in 2020 for carriers in the Asia-Pacific region – the bulk of which would be borne by carriers registered in China.
The forecast suggests that $12.8 billion would be lost in the China domestic market alone.
In the same scenario, carriers outside Asia-Pacific are forecast to bear a revenue loss of $1.5 billion, assuming the loss of demand is limited to markets linked to China.
This would bring total global lost revenue to $29.3 billion (5% lower passenger revenues compared to what IATA forecast in December) and represent 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.
These estimates are based on a scenario where COVID-19 has a similar V-shaped impact on demand as was experienced during SARS. That was characterised by a six-month period with a sharp decline followed by an equally quick recovery. In 2003, SARS was responsible for the 5.1% fall in the RPKs carried by Asia-Pacific airlines.
The estimated impact of the current COVID-19 outbreak also assumes that the centre of the public health emergency remains in China. If it spreads more widely to Asia-Pacific markets, then impacts on airlines from other regions would be larger.
“These are challenging times for the global air transport industry,” said Alexandre de Juniac, Director General, IATA. “Stopping the spread of the virus is the top priority. Airlines are following the guidance of the World Health Organisation 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. 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.”