Global airlines’ losses from Covid-19 shocks may hit $113b
Tuesday March 10 2020
Ethiopian Airlines says it will continue flying to mainland China despite the coronavirus outbreak, even as most carriers shun that route. PHOTO | FILE | NMG
Ethiopian Airlines chief executive Tewolde Gabre Mariam has defended the airline’s decision not to suspend flights to China in response to the outbreak of the coronavirus as the International Air Transport Association’s (IATA) updated assessment of impacts rises to $63 billion. The industry lobby had indicated $29.3 billion in its initial assessment.
“The turn of events as a result of Covid-19 is almost without precedent,” says IATA Secretary General Alexandre de Juniac.
“In little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse. It is unclear how the virus will develop, but whether we see the impact contained to a few markets and a $63 billion revenue loss, or a broader impact leading to a $113 billion loss of revenue, this is a crisis,” he adds.
IATA’s initial analysis published on February 20, had put lost revenues at $29.3 billion. That was based on a scenario under which the impact of Covid-19 would be mostly confined to markets associated with China.
“Since that time, the virus has spread to over 80 countries and forward bookings have been severely impacted on routes beyond China,” IATA says in a March 5 assessment.
SUSPENDED SERVICES
Considering two scenarios, IATA sees Covid-19 losses peaking at $63 billion for the global airline industry if the spread is contained in markets that had reported 100 cases by March 2 and $113 billion is it spreads further.
The losses are based on impacts on passenger operations and include effects on cargo.
The fall in demand translates to a worldwide loss of 11 per cent in passenger revenue loss equal to $63 billion. China would account for some $22 billion of this total while the Asia Pacific market in general would account for $47 billion of this total.
Under the second scenario which includes markets that had 10 or more confirmed Covid-19 cases by March 2, worldwide passenger revenues would contract by 19 per cent, equating to $113 billion in cash. The Asia Pacific region would account for $57.3 billion of losses.
Africa, Latin America and the Caribbean regions are not included in the latest analysis, because there are currently no countries in either region with at least 10 Covid-19 cases, IATA says.
Presenting IATA’s initial assessment of Covid-19 economic impact on the airline industry to the fifth edition of the Aviation Africa conference in Addis last week, Raphael Kuuchi, IATA’s Special Envoy to Africa on aero-political Affairs, said airlines in the Asia Pacific region would bear the brunt of revenue losses because of their deep connections with the Chinese market.
IATA says that while oil prices have fallen by $13 per barrel of Brent since the start of the year and could reduce costs by $28 billion on the 2020 fuel bill, it will not make up for the devastating impact that Covid-19 is having on demand.
Mr Kuuchi says airlines are unlikely to benefit from the drop in prices in the short term because they would have hedged fuel prices based on higher figures.
While most airlines in the region and other parts of the world have suspended services to China, Ethiopian has maintained its 35 weekly flights between Addis Ababa and different cities on the Chinese mainland.