The airline industry expects the first annual decline in global passenger demand in 11 years, after tallying up the initial impact of the thousands of flights cancelled because of the coronavirus outbreak in China.
The estimate shaves about 4.7 percentage points off of a passenger-traffic forecast issued just two months ago, with almost all of the impact in the Asia-Pacific region, according to the International Air Transport Association. That may be conservative. The projections assume the losses will be limited to markets linked to China.
“This will be a very tough year for airlines,” Alexandre de Juniac, Iata’s director general, said in a statement on Thursday. “Airlines are making difficult decisions to cut capacity and in some cases routes.”
The drop would be the first overall decline since the financial crisis of 2008-2009. Global passenger demand is now seen contracting 0.6 per cent this year, compared with a December forecast for 4.1 per cent growth, Iata said.
While it’s too early to forecast the impact on profitability, Iata said the outbreak will shave about $30 billion (Dh110.1bn) from revenue, with the impact most severe on Chinese airlines.
Airlines have scrapped flights to China and about 80 per cent of the country’s domestic fleet is grounded because of the epidemic that is centred in Hubei province. About 1.7 million seats were dropped from China services from January 20 to February 17 by global carriers, according to OAG Aviation Worldwide. Meanwhile, Chinese airlines cut 10.4m seats domestically.
While the impact will be felt strongest in China, carriers outside of Asia-Pacific would lose about $1.5bn in revenue, Iata said. A warning from Air France-KLM, which said the outbreak will wipe as much as 200m euros (Dh792.81m) from earnings, underlined the point on Thursday.
“Even as we see the number of new reported cases of coronavirus in China fall each day, airlines will continue to count the cost of the coronavirus outbreak for some time yet,” Alexander Sehmer, director of geopolitical intelligence at consultant Falanx Assynt, said. “For now, people and companies are extremely wary of the potential risks of travelling. Therefore, tourism and corporate travel - with events even being canceled outside of China - will not pick up in the short term.”
