IATA Warns Passenger Revenues 'Have Fallen Off a Cliff'

 - March 24, 2020, 1:41 PM
IATA director general Alexandre de Juniac (Photo: IATA)

This story is part of AIN's continuing coverage of the impact of the coronavirus on aviation.

The International Air Transport Association (IATA) on Tuesday warned that Covid-19 will hit airlines much harder than previous pandemics and recovery might not come six months after the crisis, as in the cases of SARS, the Avian Flu, and the MERS Flu. The airline trade body now expects that the global spread of the novel coronavirus and the severity of travel restrictions—markets with severe restrictions (including quarantine for arriving passengers, partial travel ban, and border closure) now cover 98 percent of global passenger revenues—could reduce this year’s passenger revenues by 44 percent, or $252 billion compared with 2019. On March 5, IATA expected passenger revenues worldwide would fall 19 percent, or $113 billion below 2019’s figure.

Speaking during a teleconference with media, IATA director general and CEO Alexandre de Juniac described the coronavirus outbreak as the “deepest crisis” the industry has ever faced. “Within a matter of a few weeks, our previous worst-case scenario is looking better than our latest estimates,” he said. “But without immediate government relief measures, there will not be an industry left standing. Airlines need $200 billion in liquidity support simply to make it through. Some governments have already stepped forward, but many more need to follow suit,” he added. Countries committing to financial relief include Singapore, China, Hong Kong, Australia, Brazil, New Zealand, Qatar, Colombia, Sweden, Denmark, Norway, and Finland. Several other governments remain in the consideration stage—including a $58 billion package in the U.S. In contrast, Mexico has indicated it will not help its airlines. 

Under the current scenario, which envisions the lifting of severe restrictions on travel after three months followed by a gradual economic recovery later this year, carriers in the Asia-Pacific region and Europe will bear the brunt of the revenue loss. IATA’s latest impact assessment analysis shows the potential for a $88 billion revenue loss in 2020 for airlines in the Asia-Pacific region and $76 billion in Europe. It expects airlines in North America to record a $50 billion drop in passenger revenue compared with 2019 and the Middle East $19 billion, while carriers in Latin America and Africa will see revenue on their passenger operations contract by $15 billion and $4 billion, respectively.

The expected global recession and its effect on jobs and business confidence will delay the recovery, IATA chief economist Brian Pearce explained. He also expects more of a “U-shaped” recovery curve rather than the V-shaped pattern of previous epidemics because of the global nature of the Covid-19 pandemic, in which different regions feel the effects in different phases. But, he stressed, experience has shown growth in demand for air travel in the longer term. “The question is how quickly we can get back to that trend and how much governments are ready to support this,” he concluded.

IATA's Third Impact Assessment.