Airlines Face Loss of Up to $30 Billion in Revenues in Wake of Coronavirus

The spread of the coronavirus from its epicenter in central China to infections identified around the world is having a severe impact on airlines as consumers cancel or delay travel plans. Industry experts say airlines worldwide could lose as much as $30 billion in revenues this year, with Chinese carriers facing the brunt of the loss with an estimated $12.8 billion deficit.

The Asia-Pacific region could face lost revenues of $12.8 billion, and carriers outside of that region could be out $1.5 billion, according to the International Air Transport Association (IATA).

“Regional carriers will see their revenue dip by 3 per cent, but this figure can go up to 50 per cent if the outbreak continues and travel restrictions are expanded,” Muhammad Ali Albakri, regional vice-president, Africa and the Middle East, at IATA said in a GulfNews.com report:

Albakri said there has been a drop in ticket sales in the Middle East and elsewhere. The industry is staring at a potential 13 per cent full-year dip in passenger demand for carriers in the Asia-Pacific region.

The estimates by IATA are based on a scenario where COVID-19 has a similar V-shaped impact on demand as was experienced during the SARS outbreak in 2003. SARS was responsible for the 5.1 per cent fall in revenue per passenger kilometre (RPK, an industry measure) carried by Asia-Pacific airlines.

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

“Governments will use fiscal and monetary policy to try to offset the adverse economic impacts,” Albakri said. “Some relief may be seen in lower fuel prices for some airlines, depending on how fuel costs have been hedged.”

ABC reported on how some major domestic airlines are responding to the coronavirus:

Just weeks after the outbreak began in Wuhan, China, in late January, major U.S. airlines suspended or canceled flights to the Chinese mainland.

Delta, United and American Airlines have all suspended all flights to mainland China through late April — and American and United have suspended flights to Hong Kong as well.

As the virus spread to other parts of the world, Delta also announced it was suspending some flights to South Korea, and all three carriers said they would issue travel waivers for those who have booked flights there. Delta and United also announced they were issuing waivers for flights to Italy, where another cluster of coronavirus cases emerged, through mid-March.

Coronavirus infections have been reported in 67 countries so far.

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