Asia-Pac airlines to record US$27.8b revenue loss due to Covid-19

A row of empty seats (L) are seen on board a Singapore Airlines flight to Singapore from Jakarta International Airport, before the aircraft's departure from the Indonesian capital on February 18, 2020. - Singapore unveiled 4.6 billion USD in financial packages on February 18 to deal with the impact of the deadly coronavirus outbreak, which has battered the city-state's economy and sparked fears of a recession. Tourism and trade are both expected to be hard hit by the virus in Singapore, an open economy with close links to China that is badly affected during any global shock. (Photo by GOH CHAI HIN / AFP)

KUALA LUMPUR: The Covid-19 is expected to cause revenue loss of US$27.8bil this year for airlines in the Asia-Pacific region, the International Air Transport Association (IATA) said.

In a statement issued late Thursday, it said the bulk of which would be borne by carriers registered in China, with US$12.8bil lost in the China domestic market alone.

IATA’s initial assessment of the impact of the Covid-19 shows a potential 13% full-year loss of passenger demand for carriers in the Asia-Pacific region.

“Considering that growth for the region’s airlines was forecast to be 4.8%, the net impact will be an 8.2% full-year contraction compared to 2019 demand levels. In this scenario, that would translate into a US$27.8bil revenue loss in 2020 for carriers in the Asia-Pacific region, ” it said.

In the same scenario, carriers outside Asia-Pacific are forecast to bear a revenue loss of US$1.5bil, assuming the loss of demand is limited to markets linked to China.

This would bring total global lost revenue to US$29.3bil (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 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% fall in the RPKs carried by Asia-Pacific airlines.

“The estimated impact of the 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, ” it said.

Alexandre de Juniac, IATA’s director general and CEO said it was premature to estimate what this revenue loss will mean for global profitability.

He said IATA doesn’t yet know exactly how the outbreak will develop and whether it will follow the same profile as SARS or not.

“These are challenging times for the global air transport industry. Stopping the spread of the virus is the top priority. Airlines are following the guidance of the World Health Organization (WHO) 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, which would be 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 2008-2009.

“And 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,” de Juniac said.

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