Transportation
COVID-19 Could Cripple Airlines With $113 Billion Revenue Loss
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Airlines around the world have cut routes, particularly to hard-hit China. In the United States, even some domestic routes have been cut back because of a drop in passengers. An airline industry group reports that under a worst-case scenario of a COVID-19 spread, the airlines could suffer a $113 billion loss in revenue this year. Based on that, it is fair to guess that some carriers will not make it to the end of the year without restructuring.
The International Air Transport Association has set out two possible conclusions to the spread of the new coronavirus. If the outbreak is limited primarily to the countries where its now, with a modest expansion beyond that:
This scenario includes markets with more than 100 confirmed COVID-19 cases (as of 2 March) experiencing a sharp downturn followed by a V-shaped recovery profile. It also estimates falls in consumer confidence in other markets (North America, Asia Pacific and Europe).
The markets accounted for in this scenario and their anticipated fall in passenger numbers, due to COVID-19, as are as follows: China (-23%), Japan (-12%), Singapore (-10%), South Korea (-14%), Italy (-24%), France (-10%), Germany (-10%), and Iran (-16%). Additionally, Asia (excluding China, Japan, Singapore and South Korea) would be expected to see an 11% fall in demand. Europe (excluding Italy, France and Germany) would see a 7% fall in demand and Middle East (excluding Iran) would see a 7% fall in demand.
Globally, this fall in demand translates to an 11% worldwide passenger revenue loss equal to $63 billion. China would account for some $22 billion of this total. Markets associated with Asia (including China) would account for $47 billion of this total.
If it spreads worldwide, the airline financial picture becomes much worse:
This scenario applies a similar methodology but to all markets that currently have 10 or more confirmed COVID-19 cases (as of 2 March). The outcome is a 19% loss in worldwide passenger revenues, which equates to $113 billion. Financially, that would be on a scale equivalent to what the industry experienced in the Global Financial Crisis.
The airline industry could be so badly damaged that it would lead to tens of thousands of layoffs, and potentially some bankruptcies.
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