Coronavirus to Cost the Aviation Industry $30 Billion

The International Air Transport Association has released its initial assessment of the impact of the COVID-19 and finds that passenger demand for carriers in the Asia-Pacific region could fall by as much as 13 percent.

Considering that growth for the region’s airlines was forecast to be 4.8 percent, 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 $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. The forecast suggests $12.8 billion would be lost in the China domestic market alone.

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.

This would bring total global lost revenue to $29.3 billion (five 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.

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 percent 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.