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Air traffic set to shrink this year as coronavirus to cost airlines £22.5bn

Tom Belger
Finance and policy reporter
The airline industry has been hit hard by the coronavirus outbreak. (Edward Wang/Reuters)

Global airline traffic will fall this year for the first time since the financial crisis because of the coronavirus outbreak, according to the industry.

Airlines will take a £22.5bn ($29.3bn) hit in lost flight revenue in 2020, according to the International Air Transport Association (IATA), which represents most global airlines.

Alexandre de Juniac, CEO of the IATA, warned of a “tough year for airlines” as a result of a “sharp downturn” in passenger demand.

Many airlines have been forced to cancel flights in and out of mainland China. “Airlines are making difficult decisions to cut capacity and in some cases routes,” said de Juniac.

Air France-KLM (AF.PA) became the latest to reveal the far-reaching disruption caused by the virus on Thursday, estimating its suspension until the end of March will cost at least £125m ($161.9m).

The IATA released figures on Friday laying bare the potential consequences if the outbreak has a similar impact to the SARS virus in 2003.

Read more: How coronavirus is hitting companies around the world

It said carriers in the Asia-Pacific region faced an 8.2% contraction this year in passenger demand, measured in the number of kilometres travelled by paying customers. They had been forecast growth of 4.8%. It could cost them £21.5bn ($27.8bn).

But carriers based outside the region are also expected to take a hit of almost £1.2bn ($1.5bn) from lost revenue on scrapped flights to and from China.

The impact will more than eliminate the 4.1% global growth in passenger demand predicted by the IATA just two months ago. It now expects a 0.6% decline in demand in 2020.

The figures could be worse if the outbreak spreads more widely or lasts longer than currently anticipated. The analysis assume a six-month shock followed by a quick recovery as in the SARS outbreak, and assumes only China remains the centre of the public health emergency.

Read more: Air France-KLM and Qantas warn of major coronavirus hit to profits

But the IATA said it was “premature” to estimate the impact on global profitability. “We don’t yet know exactly how the outbreak will develop,” it said.

The aviation body suggested some of the impact could be offset by government and central bank stimulus, and some airlines could benefit from lower fuel prices.

It also sought to reassure passengers about their safety on board. It said cabin air was filtered, airlines have to meet global standards for cleaning and staff were trained to deal with symptoms.

Dr David Powell, IATA’s medical adviser, added: “If you are sick, don’t travel. If you have flu-like symptoms, wear a mask and see a doctor. And when you travel wash your hands frequently and don’t touch your face. Observing these simple measures should keep flying safe for all.”