Airlines could lose up to $113bn on back of coronavirus, says Iata
The impact of the coronavirus could result in passenger airlines losing up to $113bn (£87bn) in revenues this year, the International Air Transport Association (Iata) has said, adding that the collapse of Flybe is proof that “urgent action” is needed to protect the industry.
The updated forecast is almost four times the estimate from only 13 days ago, reflecting the spread of the coronavirus outbreak to Europe.
Airline share prices have fallen on average by nearly 25% since the outbreak began, a drop six times greater than at the same point in the Sars outbreak of 2003.
Iata said with limited further spread of the virus, in markets with more than 100 currently confirmed Covid-19 cases, there could be a recovery that would lead to global losses being limited to $63bn this year, predominantly in the Asia-Pacific region.
However, should similar patterns emerge in countries that currently only have 10 or more cases, Iata said the crash in revenues would reach the levels of the financial crisis, with Europe and the US being hit by huge losses as sales fall by 19%.
Airlines have grounded large parts of their fleet, cut routes and implemented emergency measures to cut costs. The collapse of Flybe, Europe’s largest regional carrier, came amid a drop in demand even on an airline far from the outbreaks.
Alexandre de Juniac, Iata’s director general, said: “The turn of events as a result of Covid-19 is almost without precedent. In little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse. “Many airlines are cutting capacity and taking emergency measures to reduce costs. Governments must take note. Airlines are doing their best to stay afloat as they perform the vital task of linking the world’s economies. As governments look to stimulus measures, the airline industry will need consideration for relief on taxes, charges and slot allocation. These are extraordinary times.”
Airlines in the eye of the storm
Alitalia The Italian carrier has long been propped up by its government, having been in administration for three years. The EU is now investigating the legality of a €400m (£347m) state loan to the carrier, just as the coronavirus outbreak hit and foreign demand for flights to Italy evaporated.
Norwegian Ambitious expansion and huge debts have long made the low-cost carrier look vulnerable – Ryanair’s chief executive, Michael O’Leary, predicted it would not survive previous winters. However, HSBC analyst Andrew Lobbenberg believes a refinanced Norwegian is on the up, provided suppliers do not lose confidence during the crisis.
Finnair More eastward-facing than most European carriers, it was one of the first to issue a profits warning when Chinese flights were axed. As Asia continues to bear the brunt, for now, Finnair was hit harder and earlier than its neighbours. It has trimmed schedules to Japan and postponed planned expansion in South Korea.
Cathay Pacific Already struggling after Hong Kong’s democracy protests hit bookings, Cathay has asked staff to take unpaid leave and has slashed flights. It is more reliant than any nonChinese carrier on flights to the mainland; and although Hong Kong is not quarantined, fewer people are wanting to fly that close.
Lufthansa The German carrier, has drastically cut capacity, this week cancelling flights equivalent to grounding around 150 planes from its 770strong fleet.
Wizzair The timing is particularly unfortunate for the Hungarian budget carrier, according to Lobbenberg, as it was expanding its fleet while rival carriers awaited deliveries of the grounded 737 Max. Now it will have even more uneconomical empty seats.
EasyJet The carrier has cancelled 500 flights to Italy this month and embarked on emergency cost-cutting measures. Its share price has dropped by a third since last week.
IAG The British Airways owner admitted last week it was impossible to predict how much the coronavirus crisis would cost, as it cancelled more than 400 flights around the world due to falling demand.
Virgin Atlantic The Flybe co-owner has problems of its own, with seat sales down 50% in recent days. Even the chief executive has taken a pay cut.
Southwest Airlines The American low-cost pioneer warned on Thursday of a $300m loss during the first quarter due to “a significant decline in customer demand, as well as an increase in trip cancellations”.
United A pay and recruitment freeze will be accompanied by cuts of 20% to its international flight schedule next month, as well as 10% of its North American flights. Some of its biggest planes will be mothballed.
Japan Airlines/All Nippon Airlines Japan’s two main carriers both announced unprecedented domestic flight cancellations for the coming week, more than 500 services axed due to lack of demand as sports and cultural events around the country were postponed.
Air China/China Eastern/China Southern Some domestic capacity at Chinese carriers is being restored, at rock-bottom prices. The big three carriers account for the bulk of Iata’s predicted $22bn revenue losses in China this year.