Economic disruption caused by the coronavirus outbreak could see global airlines lose more than $250 billion, the International Air Transport Association has said in its third update on the likely trajectory of the pandemic’s many impacts.
This comes as more countries close borders to passenger flights and ground domestic operations, triggering an economic recession. As of March 24, broader restrictions to airline operations covered 98 percent of passenger operations globally, the industry lobby said.
“Owing to the severity of travel restrictions and the expected global recession, it is now estimated that industry passenger revenues losses could reach $252 billion or 44 percent below 2019’s figure,” said Brian Pierce, IATA chief economist. That is assuming severe travel restrictions will remain for up to three months, followed by a gradual economic recovery later in 2020.
IATA had earlier this month predicted global revenue losses of $113 billion but that was before more countries recorded cases of the virus – from over 80 countries then, the outbreak has spread to 203 countries and territories – and subsequently introduced sweeping travel restrictions that have ground to a halt international passenger travel.
“Within a matter of a few weeks, our previous worst-case scenario is looking better than our latest estimates,” IATA chief executive Alexandre de Juniac said, describing the situation as the industry’s “gravest crisis.”
Withdrawn capacity
As the industry grapples with losses from suspended flights, the cargo sector, on the other hand, has seen an upsurge in demand owing to shipments of emergency supplies. But the reduction in passenger flights means some capacity has been withdrawn considering airlines accommodated significant capacity for cargo on passenger aircraft, IATA said.
In addition to canceled flights, airline operators are also facing challenges in countries where cargo crews are being subjected to the same quarantine measures as passengers. “Cargo crew are being caught up in quarantine measures aimed at commercial passengers. In some cases, they are not being allowed to position on commercial flights,” de Juniac explained.
There are also destinations where normal accommodation for crew rest is unavailable and no alternative arrangements have been made, the IATA chief said. In Somalia and Djibouti for instance, cargo flights are subject to the same temporary flight ban as passenger aircraft.
Government intervention needed
Across the world, governments are deploying relief funds and bailout packages in cushioning the impact of the virus outbreak on their airline operators, widely regarded as most affected by the pandemic.
Australia set up a $430 million fund for its aviation industry, Sweden and Denmark have a $300 million loan guarantee scheme for Scandinavian carrier SAS and the United States’ recently approved $2 trillion stimulus package covers airline operators.
While some governments have already stepped forward, many more need to follow suit, de Juniac explains. “Airlines need $200 billion in liquidity support simply to make it through. Without immediate government relief measures, there will not be an industry left standing.”
Beyond the industry, however, problems in the aviation sector could lead to massive job losses worldwide. According to IATA, a collapse of the industry would translate into the loss of 65 million jobs globally because one job in the airline transport industry supports another 24 jobs in the economy.
