FRANKFURT—IATA expects airlines globally to lose around $250 billion in revenues this year as a consequence of the coronavirus crisis and is asking governments to quickly intervene.
The latest IATA guidance replaces the previous worst-case scenario—which was only two weeks old and forecast the industry would lose up to $113 billion in revenues in 2020. Shortly after IATA had published the previous estimate, numerous countries implemented severe travel restrictions which “in effect shut down international air travel,” according to IATA chief economist Brian Pearce. The association did not make a forecast for profits or losses.
Capacity will be down 38% in 2020, according to IATA. Airlines in Europe and the Middle East will reduce available seat miles by 90% and 80% in the second quarter respectively, recovering to -45% in the third quarter. Capacity will still be down 10% over the previous year in the fourth quarter across all regions.
Asia-Pacific and North America are expected to see a 50% fall in capacity year-on-year in the second quarter, a 25% drop in the third and a 10% reduction in the fourth quarter. Latin America will go from -80% to -40% in the second and third quarter, Africa from -60% to -30%.
The industry as a whole will cut capacity by 65% in the second quarter and 33% in the third.
IATA therefore no longer expects a quick and simple V-shaped recovery that many have hoped for based on previous downturns. Pearce remarked that the COVID-19 fallout is different because it is global and overlapping as different geographies are in different phases. The recovery is also accompanied by a global economic recession that will make it harder for airlines to return to previous traffic volumes. “It is more than a U-shape than a V-shape,” Pearce said. Longer term though, “all the lessons of the past have been that demand is robust. The question is how quickly we can get back to that trend.”
However, IATA hopes for a “strong recovery” in 2021 on the back of massive fiscal stimulus packages that are equivalent to 20% of GDP in some countries.
Pearce noticed “some signs of a turning point in the Chinese domestic market already” and yields in the first two weeks of March are also stabilizing. “However, that is absolutely not the case for the industry as a whole.”
IATA left the estimated volume of needed government support unchanged at $200 billion. “It is the deepest crisis we have ever had in this industry,” IATA director general and CEO Alexandre de Juniac said. “We need massive [government] action very quickly.”
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