COVID-19 likely to hit demand, revenues of airlines: IATA

Sarkaritel
By Sarkaritel February 21, 2020 06:41


New Delhi, Feb 21  Coronavirus (COVID-19) is expected to cause a 13 per cent full-year loss of passenger demand for carriers in the Asia-Pacific region, the International Air Transport Association (IATA) said on Thursday.

According to IATA, considering that growth for the region’s airlines was forecast to be 4.8 per cent, the net impact will be an 8.2 per cent 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, with $12.8 billion lost in the China domestic market alone,” IATA said in a statement.

“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.”

Consequently, the total global lost revenue will come to $29.3 billion and represent a 4.7 per cent hit to global demand.

In December, IATA forecast global RPK growth of 4.1 per cent, so this loss would more than eliminate expected growth this year, resulting in a 0.6 per cent 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,” the statement said.

“That was characterized by a six-month period with a sharp decline followed by an equally quick recovery.”

In 2003, SARS was responsible for the 5.1 per cent fall in the RPKs carried by Asia-Pacific airlines.

“The estimated impact of the COVID-19 outbreak also assumes that the center 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,” the statement said.

“It is premature to estimate what this revenue loss will mean for global profitability. We don’t yet know exactly how the outbreak will develop and whether it will follow the same profile as SARS or not.”

Besides, IATA said that governments will use fiscal and monetary policy to offset the adverse economic impacts.

“Some relief may be seen in lower fuel prices for some airlines, depending on how fuel costs have been hedged.”

Sarkaritel
By Sarkaritel February 21, 2020 06:41