Aviation faces heavy revenue loses as COVID-19 ignite global economic crisis

0
Rear view of young woman with luggage walking towards the airplane. Female traveler going on vacation

The Aviation industry could lose $63 billion in worldwide revenues this year if COVID-19 is contained in current markets with over 100 cases as of 2 March and $113 billion if there is a broader spreading of COVID-19. This is outside what the cargo operations could lose in 2020. This is contained in the International Air Transport Association (IATA) updated analysis of the financial impact on the global air transport industry released recently.

IATA’s previous analysis released on 20 February 2020 estimated loss of revenues at $29.3 billion based on a scenario that would see the impact of the COVID-19 largely confined to markets associated with China. Since that time, the virus has spread to over 80 countries and forward bookings have been severely impacted on routes beyond China.

“There are dramatically fewer people flying this week than there were last week,” said Nicholas E. Calio, chief executive of Airlines for America, a trade organization as quoted by the NewYork Times. “Flights are being taken down because people aren’t getting on airplanes.”

Movement of people have strongly declined, Airlines have had to cancel flights again and again since jumble aircrafts are almost flying empty. It is even not out of place to say that IATA projected impact could be out passed.

The place of China in the global business has once again come to full glare being a strategic occupant of the world supply chain. This is further aggravated by the continuous spread of the virus to other major economic hub such as other Asian countries and Europe.

In the first scenario according to the IATA analysis, fall in passenger numbers is anticipated in the countries 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.

According to IATA, this globally 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.

The second 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.

This would be the biggest hit so far in almost 20 years after the terrorist attacks of Sept. 11, 2001. It took long years for airlines to fully recover from the air travel loses. There are growing worries that recovery from this staring impact of the coronavirus could take longer years.

Now how is this all impacting on the global economy? Is economic crisis imminent? The abrupt decline in global air travel suggests so. Economic impacts of the outbreak may be entering a more disturbing phase

The coronavirus has already started impacting on stock markets globally, supply chains have started to impede on manufacturing and marketing companies.

It is hoped that the effort of the World Health Organization is efficacious enough to curtail the spread of the virus. However, whether we see the impact contained to a few markets and a $63 billion revenue loss, or a broader impact leading to a $113 billion loss of revenue, this is a crisis.

0 0 votes
Article Rating
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments