COVID-19 outbreak could cost global airline industry up to $314bn, predicts IATA

Global airline industry's passenger revenues have dropped by $314 billion in 2020, due to the outbreak of COVID-19 --25 per centmore than previously forecast.

According to the International Air Transport Association's (IATA) updated analysis showed on Tuesday, the data represents the impact of the severe domestic restrictions lasting over three months and some on international travel extending beyond that time period.

On March 24, IATA estimated that $252 billion will be the amount of revenues that could be lost in a scenario with severe travel restrictions lasting three months. The updated figures reflect a significant deepening of the crisis since then.

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The pandemic has brought air travel to a standstill, with many airline fleets grounded and no visibility on when travel restrictions will be eased.

Besides, the full-year passenger demand is expected to go down by 48 per cent compared to 2019 due to the overall economic developments.

"The economic shock of the COVID-19 crisis is expected to be at its most severe in Q2 when GDP is expected to shrink by 6 per cent (by comparison, GDP shrank by 2 per cent at the height of the Global Financial Crisis)," IATA said in a statement.

"Passenger demand closely follows GDP progression. The impact of reduced economic activity in Q2 alone would result in an 8 per cent fall in passenger demand in the third quarter."

As per the statement, travel restrictions will deepen the impact of recession on demand for travel.

It said: "The most severe impact is expected to be in Q2. As of early April, the number of flights globally was down 80 per cent compared to 2019 in large part owing to severe travel restrictions imposed by governments to fight the spread of the virus.

"Domestic markets could still see the start of an upturn in demand beginning in the third quarter in a first stage of lifting travel restrictions. International markets, however, will be slower to resume as it appears likely that governments will retain these travel restrictions longer."

Furthermore,IATA has urged governments to provide airlines with liquidity urgently to help them to survive the crisis, warning that many will go bust within weeks unless they receive help. It said it expects domestic markets to be the first to reopen, as has happened in China, with international routes following gradually.

A phased return of international flights would still be problematic for airline finances because most carriers obtain the bulk of their revenue from international routes, IATA said.

(with inputs)