Coronavirus Will Lower Global Airline Revenue By Up To $5 Billion – Report
Due to the coronavirus outbreak, global airline revenues are set to fall by $4 billion to $5 billion in the first quarter of 2020, according to a forecast from the U.N.’s International Civil Aviation Organization (ICAO).
In a recent statement, the Montreal-based agency warned that the coronavirus, which has infected 64,000 people worldwide and killed at least 1,380, would have a greater impact on the aviation industry than the 2003 SARS epidemic.
ICAO reports that while 50 airlines have significantly cut back operations, 70 others have fully cancelled all international flights to and from mainland China, resulting in an 80% reduction of foreign airline capacity for travelers to and from China, as well as a 40% capacity reduction by Chinese airlines.
The estimated $4 billion to $5 billion hit to global airline revenues comes from around a 40% overall reduction in passenger capacity in the first quarter—almost 20 million passengers less than what airlines had projected.
According to similar findings from OAG, a firm that analyzes global airline schedules, the coronavirus has resulted in an unprecedented reduction in international air traffic over the past few weeks, with two-thirds of international flights from China now cancelled.
Out of all the countries facing steep declines in airline travel, Japan has lost the most, losing 16% of its total international flight capacity in recent weeks, according to OAG. That’s because of 200,000 fewer direct flight seats—about 60% of all traffic between Japan and China, being affected.
ICAO’s forecast for the first quarter of 2020 sees Japan losing $1.29 billion in tourism revenue due to the drop in Chinese travelers, while another neighboring country that’s been affected, Thailand, could lose $1.15 billion.
Flights coming in and out of China accounted for around 5.2% of all international flight capacity a month ago. Earlier this week, that number had fallen to 1.8%, according to OAG’s data.
When the aviation industry finally rebounds. While global airlines have taken a big hit from the coronavirus, OAG points out that capacity and demand typically recover six months after the peak of an emergency, drawing from previous epidemics like SARS and Ebola as an example.
With investors around the world continuing to worry about the impact of the fast-spreading coronavirus outbreak on China’s and the world’s economy, experts are forecasting that global economic growth in 2020 will be reduced by 0.2% to 0.3%, while in the U.S. first quarter growth could take a 0.2% to 0.4% hit.
Estimates for China’s first quarter GDP now range from 0% to around 5%—down from the 5.9% current annual projected growth rate. The SARS outbreak, by comparison, knocked 2% off China’s GDP yearly growth and was estimated to have cost the global economy up to 0.3%, according to Time.