Coronavirus: UN aviation body estimates $4bn-$5bn drop in airline first-quarter revenue

ICAO expects the impact on the aviation industry to exceed that of the 2003 Sars epidemic

epa08216006 A worker disinfects the cabin of an Ethiopian Airlines' aircraft at Bole International Airport in Addis Ababa, Ethiopia, 13 February 2020. Despite growing pressure to suspend its flights to China, Africa's largest air carrier refuses to do so saying that the airline will 'stand with Chinese people' and 'we should not isolate China', according to the Ethiopian media. Dozens of airlines across the globe has suspended their services to the country.  EPA/STR
Powered by automated translation

The United Nations aviation agency said global airlines could lose $4 billion to $5 billion in gross operating revenue in the first quarter of 2020, as the spread of coronavirus triggers flight cancellations.

The International Civil Aviation Organisation (ICAO) said about 70 airlines cancelled all international flights to and from mainland China and an additional 50 carriers curtailed their operations, the Montreal-based agency said in a report. This resulted in an 80 per cent reduction of foreign airline capacity for travellers directly to and from China, and a 40 per cent capacity reduction by Chinese carriers.

"COVID-19 impacts are expected to be greater than those caused by the 2003 Sars epidemic, in light of the higher volume and greater global extent of the flight cancellations being seen," ICAO said. "Seasonal passenger load factors are another extenuating factor, as is the fact that China’s international air traffic has doubled, and its domestic traffic increased five-fold, since the 2003 period."

The deadly coronavirus, named Covid-19, has hit the aviation industry hard, particularly at its core in China where the disease first appeared. Tens of thousands of flights in and out of the country have been cancelled or entirely removed from schedules as airlines slash capacity to cope with the crisis.

Before the outbreak, airlines were planning to increase capacity by 9 per cent on international routes to and from China for the first quarter of this year compared to 2019, ICAO said.

The agency's preliminary estimates indicate the first quarter of 2020 has instead seen an overall reduction ranging from 39 per cent to 41 per cent of passenger capacity, or a drop of 16.4 to 19.6 million passengers compared to airline  projections. This equates to a potential reduction of $4bn to $5bn in gross operating revenue for global airlines.

These estimates do not include potential impacts due to reductions in international air freight movements on cargo-only aircraft, airports, air navigation service providers, as well as Chinese domestic air traffic and international traffic to Hong Kong, Macau or Taiwan, ICAO said.

The International Air Travel Association (Iata), an industry lobby group with about 290 member airlines, expects further flight schedule changes in February.

"It is clear that demand has fallen on routes associated with China, and airlines are responding to this by cutting capacity for both domestic and international China," Alexandre de Juniac, Iata's director general, said in February. "The situation is evolving fast, but we are observing significant schedules adjustments for February.”

ICAO also estimates that Japan could lose $1.29bn in tourism revenue in the first quarter of 2020 due to a drop in the number of Chinese travellers, while Thailand stands to lose $1.15bn.

Chinese tourists, travelling individually and in groups, account for 16 per cent of the world's international travel spending, according to the World Travel and Tourism Council (WTTC).

Chinese outbound travel and tourism spending has grown seven-fold over the last decade, with an annual growth rate of 21.7 per cent, the WTTC said.

An analysis of previous major viral epidemics shows the average recovery time for visitor numbers to a destination was 19.4 months, but this recovery could be reduced to 10 months with the right response and management, the council said.