Business / Covid 19

Coronavirus outbreak to cost airlines $46bn

17:37 pm on 21 February 2020

Airlines stand to lose $US29.3bn ($NZ46.4bn) of revenue this year due to the coronavirus outbreak, the global airline industry body has warned.

Photo: AFP

The International Air Transport Association (IATA) predicts demand for air travel will fall for the first time in more than a decade.

Airlines in China and other parts of the Asia Pacific region are expected to take the vast majority of the impact.

It comes as carriers around the world have been forced to reduce flights.

In total, airlines in the Asia Pacific region are set to see a $27.8bn ($NZ42.8bn) revenue loss in 2020, while those outside Asia are expected to lose $1.5bn ($NZ2.4bn) in revenue, IATA has forecast.

Of that figure, IATA predicts that carriers in China are set to lose revenue of $12.8bn ($NZ20bn) in their home market alone.

In a statement Alexandre de Juniac, IATA's director-general said: "Airlines are making difficult decisions to cut capacity and in some cases routes... This will be a very tough year for airlines."

However it is too early to predict what this expected revenue loss will mean for airline's profitability this year, IATA cautioned.

IATA said it had based its estimates on the slump in demand that was seen during the Sars (severe acute respiratory syndrome) outbreak in 2003. That was characterised by a six-month period that saw a sharp fall in demand followed by an equally quick recovery.

That year Sars was responsible for the 5.1 percent fall in demand for airlines in the Asia-Pacific region.

It also assumes that the virus remains centred on China, but warned the effect could be far worse if the infection spreads further in the region.

IATA has previously forecast that Asia Pacific would be the biggest driver of air travel demand between 2015 and 2035, with four of the five fastest-growing markets in terms of passengers being from Asia.

Yesterday two major airline groups warned of a severe financial impact as the coronavirus outbreak dampens demand for travel in Asia.

Australia's Qantas said the outbreak would result in a 100m -150m Australian dollar hit for the financial year, once it had accounted for cutting flights.

European carrier Air-France KLM estimated the coronavirus would cost it between €150m and €200m between February and April.

-BBC