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Passenger revenue lost to coronavirus hits $29.3 billion

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As the coronavirus epidemic continues to spread and take its toll on economies, estimates have put the lost passenger revenue at $29.3billion, with China the worst-hit.

Although global airlines have either withdrawn or scaled down operations into China, Chinese registered airplanes globally are also affected in the mounting losses, unlike African fleets that are largely registered in Europe and America.

Coronavirus, the global public health emergency that broke out in Wuhan province of China last year, has since crossed national borders into more than 20 countries, with 13 cases reaching the United Kingdom.

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Out of the more than 79,500 confirmed incidences worldwide, 77,150 are in Mainland China, according to John Hopkins University data. The country’s death toll exceeded 2,500 on Monday.

Italy is faring worse than anywhere else in Europe, with its 215 patients and six deaths, prompting several small towns in the Lombardy and Veneto regions to be put on “lockdown”.

The International Air Transport Association (IATA), announced that its initial assessment of the impact of the novel coronavirus or covid-19, shows a potential 13 per cent 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 per cent, the net impact will be an 8.2 per cent full-year contraction compared to 2019 demand levels. In this scenario, that would translate into a $27.8billion revenue loss in 2020 for carriers in the Asia-Pacific region—the bulk of which would be borne by carriers registered in China, with $12.8billion lost in the China domestic market alone.

In the same scenario, carriers outside Asia-Pacific are forecast to bear a revenue loss of $1.5billion, assuming the loss of demand is limited to markets linked to China. This would bring total global lost revenue to $29.3billion; five per cent lower passenger revenues compared to what IATA forecast in December and represent a 4.7 per cent hit to global demand.

In December, IATA forecast global RPK growth of 4.1 per cent, so this loss would more than eliminate expected growth this year, resulting in a 0.6 per cent 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 per cent fall in the passenger traffic carried by Asia-Pacific airlines.

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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.

IATA stated that it was premature to estimate what this revenue loss would mean for global profitability.

IATA’s Director-General and CEO, Alexandre de Juniac, 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. Some relief may be seen in lower fuel prices for some airlines, depending on how fuel costs have been hedged.

“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 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. We estimate that global traffic will be reduced by 4.7 per cent 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 2008-09.”

An increasing number of airlines across the world are making major operational changes in response to the effects of the rapidly spreading novel covid-19 outbreak.

The range of airline reactions varies widely. Some are cancelled all flights to China, while others are only stopping flights to the part of the country most affected. In some cases, the changes are for public health reasons, and in others the capacity reductions reflect plummeting demand as people cancel travel plans.

IATA urged government to take leadership in shoring up their economies. The Singapore government, for example, is allocating SGD 112 million to provide financial relief to airlines and the aviation sector struggling to economically maintain connectivity.

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“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,” de Juniac said.

The International Monetary Fund (IMF) is, however, optimistic that the Chinese economy may return to normal in the second quarter, with relative minor or short-lived impact on the world economy.

Rising from the G20 meeting on Economic Impact of Covid-19, the Managing Director of IMF, Kristalina Georgieva, said their baseline scenario showed the 2020 growth for China would be 5.6 per cent – 0.4 percentage points lower than the January WEO Update. Global growth would be about 0.1 percentage points lower.

“But we are also looking at more dire scenarios where the spread of the virus continues for longer and more globally, and the growth consequences are more protracted.

“Global cooperation is essential to the containment of the Covid-19 and its economic impact, particularly if the outbreak turns out to be more persistent and widespread. To be adequately prepared, now is the time to recognise the potential risk for fragile states and countries with weak health care systems.

“The IMF stands ready to help, including through our Catastrophe Containment and Relief Trust that can provide grants for debt relief to our poorest and most vulnerable members.”

“Beyond country-level policies, many challenges are global and require global solutions. We discussed a number of these in Riyadh, including addressing tax challenges that arise from the digitalisation of the economy; strengthening debt transparency and sustainability; and building a more open and resilient financial system. There was also strong support for the Saudi Presidency’s agenda of enhancing access to opportunities, especially for women and youth,” Georgieva said.”

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Similarly, a United States Federal Aviation Administration (FAA), and Nigerian Civil Aviation Authority (NCAA) licensed Flight Dispatcher and Ground Instructor, Victoria Adegbe, has advised sick passengers to abstain from traveling to save their lives from the ravaging spread of Corona virus.

Adegbe said sick passengers manifesting symptoms of other infections were more susceptible to contract coronavirus through air travel compared to other modes of transportation because of cabin pressurisation associated with air travel.

“I went on a research to see the categories of personal hygiene of people infected and discovered that over 75 per cent of those infected already had a prior disease such as diabetes, pneumonia and high blood pressure.

“You shouldn’t fly if you’re sick. Go to a hospital first and get treated. You should drink lots of water; keeping your throat hydrated decreases the chance of the Corona virus infecting you. Personal hygiene such as washing your hands with soap under running water and not in a bowl, using hand sanitisers and coughing inside a handkerchief,” she added.

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