Passenger revenues likely to fall by $252 bn on travel curbs: IATA
In wake of the COVID-19 pandemic, the International Air Transport Association (IATA) estimates that the industry passenger revenues could plummet $252 billion.
March 25, 2020: In wake of the COVID-19 pandemic, the International Air Transport Association (IATA) estimates that the industry passenger revenues could plummet $252 billion or 44 percent below 2019’s figure. This is in a scenario in which severe travel restrictions last for up to three months, followed by a gradual economic recovery later this year.
IATA’s previous analysis of up to a $113 billion revenue loss was made on March 5, 2020, before the countries around the world introduced sweeping travel restrictions that largely eliminated the international air travel market.
“The airline industry faces its gravest crisis. Within a matter of a few weeks, our previous worst-case scenario is looking better than our latest estimates. 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,” said IATA’s director general and CEO, Alexandre de Juniac.
Alexandre de Juniac: Letting this industry fail will have an impact far beyond the livelihoods of the 2.7M people airlines employ. And it will go beyond the 65M other jobs in the value chain.— IATA (@IATA) March 24, 2020
The latest analysis envisions that under this scenario, severe restrictions on travel are lifted after 3 months. The recovery in travel demand later this year is weakened by the impact of the global recession on jobs and confidence. Full-year passenger demand (revenue passenger kilometres or RPKs) declines 38 percent compared to 2019. Industry capacity (available seat kilometres or ASKs) in domestic and international markets declines 65 percent during the second quarter ended June 30 compared to a year-ago period, but in this scenario recovers to a 10 percent decline in the fourth quarter.
As per de Juniac’s announcement at the IATA Media Briefing on COVID-19 dated March 24, “IATA has been asking governments to provide a lifeline of financial support. A liquidity crisis is coming at full speed. Revenues have fallen off a cliff. And no amount of cost-cutting can save the day if no cash is coming in the door. Without financial relief, airlines will go bust. And that could happen en masse.”
IATA welcomed the support of those governments around the world that have provided financial relief to airlines and urged other governments to follow suit before more damage is done.
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Fortunately, many governments understand the critical role of aviation. Among countries committing to financial relief are Singapore, China, Hong Kong, Australia, Brazil, New Zealand, Qatar, Colombia, Sweden and Denmark, Norway, and Finland. Several other governments are in the consideration stage—including a $58 billion package in the US and significant support measures from the European Central Bank, as per his statement.
As cargo operations are vital, governments need to do all they can to facilitate an industry that is scrambling to meet demand. “The one part of the business that is operating is cargo. And it is doing everything it can to meet demand. And that is a big challenge because of the severe reduction in the cargo capacity that was carried on passenger flights. Airlines are reintroducing freighters and doing their best to even adapt passenger aircraft into their cargo operations. That’s because global supply chains are still running. And air cargo is essential to keeping it that way. Last week we highlighted the need for governments to ensure that air cargo can continue to play a critical role. I wish that I could say that all has been smooth. That is not the case,” he concluded.