The Strategist

Airlines getting ready for first drop in passenger flow in 11 years

02/21/2020 - 06:36

For the first time after the financial crisis, airlines may face a drop in passenger traffic. Lost business revenue due to coronavirus is tentatively estimated at $ 30 billion.

Hugh Llewelyn
Hugh Llewelyn
In 2020, the airline industry expects a decrease in global passenger traffic by 0.6%, the International Air Transport Association (IATA) reports in its forecast. The organization was forced to change the forecast because of the new coronavirus: in December last year, it predicted an annual growth of 4.1%.

Revenues that carriers would lose due to coronavirus may reach $ 29.3 billion, the report reads. The main losses will come from companies operating in the Asia-Pacific region — they may lose $ 27.8 billion. The Chinese market will have $ 12.8 billion in lost revenue.

At the same time, it is too early to assess how much revenue loss will affect airline profitability, IATA notes. “We do not yet know exactly how the epidemic will spread <...> Governments will use fiscal and monetary policies in an attempt to offset the economic effect of [the virus],” the organization said. A possible reduction in fuel prices can help companies, the report said.

“It will be a very difficult year for the airlines,” said IATA President Alexandre de Juniac. He noted that the annual decrease in passenger traffic will be the first since the global financial crisis of 2008-2009. “Airlines make difficult decisions such as reducing the amount of work and, in some cases, refusing directions,” he said.