IATA: Outlook for Asian airlines worsens as virus impact increases

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.

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(PHOTO: Shutterstock)

Airlines in Asia could lose up to 13 percent of passenger demand and see losses of almost US$30 billion for the year as the COVID-19 coronavirus continues its relentless march across the planet, according to the International Air Transport Association (IATA). The virus, which originated in Wuhan in China has already infected more than 75,000 people and more than 2,200 have died.

IATA, which earlier had pegged aviation losses globally at around US$5 billion, said considering growth for Asia-Pacific airlines was originally forecast to be 4.8 percent for 2020, the net impact will be an 8.2 percent full-year contraction compared to 2019 demand levels. “In this scenario, that would translate into a US$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 US$12.8 billion lost in the China domestic market alone”, IATA said in a statement on 19 February.

The impact of the virus as of 20 February 2020, according to a tracking service from Johns Hopkins University in the US. (PHOTO: Matt Driskill)

IATA said carriers outside Asia-Pacific are forecast to bear a revenue loss of US$1.5 billion, “assuming the loss of demand is limited to markets linked to China. This would bring total global lost revenue to US$29.3 billion (5 percent lower passenger revenues compared to what IATA forecast in December) and represent a 4.7 percent hit to global demand. In December, IATA forecast global RPK growth of 4.1 percent, so this loss would more than eliminate expected growth this year, resulting in a 0.6 percent global contraction in passenger demand for 2020”.

The estimates are based on a “v-shaped” recovery in demand, similar to what happened after the SARS virus curtailed travel in 2002-2003. That was characterised by a six-month period with a sharp decline followed by an equally quick recovery, IATA said. In 2003, SARS was responsible for a 5.1 percent fall in the RPKs carried by Asia-Pacific airlines.

Alexandre de Juniac, director general of IATA.

“These are challenging times for the global air transport industry,” said Alexandre de Juniac, IATA’s director general and CEO. “Stopping the spread of the virus is the top priority. Airlines are following the guidance of the World Health Organisation (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, severe for those particularly exposed to the China market…This will be a very tough year for airlines.”

Governments have an important role to play in this crisis, de Juniac added. Airlines have developed standards and best practices linked to the International Health Regulations (IHR) to manage effectively and efficiently in times of public health emergencies. Airlines, therefore, depend on governments to also follow the IHR so we have an effective global approach to containing the outbreak. “We have learned a lot from previous outbreaks. And that is reflected in the IHR. Governments need to follow it consistently,” said de Juniac.

A bare Terminal 1 at Taiwan’s Taoyuan International Airport where travellers are few and far between. (PHOTO: Shutterstock)

It is also important for governments to take leadership in shoring up their economies. The Singapore government, for example, is allocating S$112 million (US$79.9 million) to provide financial relief to airlines struggling to economically maintain connectivity. “Airlines and governments are in this together. We have a public health emergency, and we must try everything to keep it from becoming an economic crisis. Relief on airport costs will help maintain vital air connectivity. Other governments should take good note and act quickly,” said de Juniac.

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Matthew Driskill is the Editor of Asian Aviation and is based in Cambodia. He has been an Asia-based journalist and content producer since 1990 for outlets including Reuters and the International Herald Tribune/New York Times and is a former president of the Foreign Correspondents Club of Hong Kong. He frequently appears on international broadcast outlets like CNN, Al Jazeera and the BBC and has taught journalism at Hong Kong University and the American University of Paris. Driskill has received awards from the Associated Press for Investigative Reporting and Business Writing and in 1989 was named the John J. McCloy Fellow by the Graduate School of Journalism at Columbia University in New York where he earned his Master's Degree.

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