AIRLINES EXPECT 1ST TRAFFIC DROP SINCE 2003; IMPACT OF VIRUS CITED
The airline industry expects the first annual decline in global passenger demand in 17 years, after tallying up the initial impact of the thousands of flights canceled 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. “Airlines are making difficult decisions to cut capacity and in some cases routes.”
The drop would be the first overall decline since the SARS outbreak in 2003. Global passenger demand is now seen contracting by 0.6 percent this year, compared with a December forecast for 4.1 percent growth, IATA said.
While it’s too early to forecast the impact on profitability, IATA said the outbreak will shave as much as $30 billion from revenue, with the impact most severe on Chinese airlines. China’s government has stepped up efforts to contain the damage. Indebted conglomerate HNA Group Co. is expected to be taken over and its airline assets sold, Bloomberg News reported.
Under the plan, China would sell the bulk of HNA’S airline assets to the country’s three biggest carriers — Air China, China Southern Airlines and China Eastern Airlines, people familiar with the matter have said. Hna-backed Suparna Airlines
is also likely to be unloaded to the Jiangsu provincial government, the people said.
Airlines have scrapped flights to China and about 80 percent of the country’s domestic fleet is grounded because of the epidemic that is centered in Hubei province. About 1.7 million seats were dropped from China services from Jan. 20 to Feb. 17 by global carriers, according to OAG Aviation Worldwide. Meanwhile, Chinese airlines cut 10.4 million seats domestically.
Philip writes for Bloomberg News.