COVID-19 may make $21.1B dent to North America’s air travel
Air travel revenue in Canada and the United States could drop by US$21.1 billion if the coronavirus outbreak spreads broadly and further erodes demand for plane tickets, says an International Air Transport Association analysis released Thursday.
If the virus spreads, worldwide passenger revenues are expected to drop 19 per cent for a total loss of US$113 billion, based on the analysis from the IATA, which represents 290 airlines comprising 82 per cent of global air traffic.
In Canada and the U.S., a 10-per-cent drop in passengers would result in a Us$21.1-billion revenue loss for airlines. This follows a hard year where North American airlines grappled with a capacity crunch from the grounding of Boeing’s 737 Max fleet.
Even if the virus is contained in regions that already have more than 100 confirmed cases, IATA estimated revenue loss of at least US$63 billion worldwide. Bookings for April have dropped drastically in hard-hit markets including China, South Korea and Iran, where the year-over-year number of passengers has respectively fallen nearly 80 per cent, 55 per cent and 50 per cent.
“The turn of events as a result of COVID-19 is almost without precedent,” IATA chief executive Alexandre de Juniac said in a statement. “In little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse.”
Lower oil prices could help airlines cut costs to mitigate some of the revenue loss, but most airlines lock-in fuel prices well in advance so this won’t soothe bottom lines in the short-term. IATA called on governments to consider relief on taxes, charges and slot allocation for airlines that are cutting capacity to reduce costs during the crisis.
Air Canada declined to comment on the financial impact of the outbreak thus far and isn’t expected to reveal details until it releases it first-quarter results in May. Its stock price has plummeted about 34 per cent since the beginning of the year. It closed down 8.3 per cent to $32.16 on Thursday.