IATA Predicts 55% Drop in Airlines’ Revenue

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IATA’s Director General and CEO, Alexandre de Juniac

Chinedu Eze

The International Air Transport Association (IATA) has released updated analysis showing that the COVID-19 crisis is estimated to see airlines’ passenger revenue drop by $314 billion in 2020, a 55 per cent decline compared to 2019.

This is just as IATA said government’s financial relief for airlines would be critical policy measure to safe the airlines.

On March 24, IATA had estimated $252 billion in lost revenues (-44 per cent vs. 2019) in a scenario with severe travel restrictions lasting three months.

The world body said the updated figures reflected a significant deepening of the crisis since then and reflected parameters which included: severe domestic restrictions lasting three months, some restrictions on international travel extending beyond the initial three months, worldwide severe impact, including Africa and Latin America (which had a small presence of the disease and were expected to be less impacted in the March analysis).

IATA said full-year passenger demand (domestic and international) was expected to be down 48 per cent compared to 2019. It also identified the two main elements driving this, which included overall economic developments and noted that the world was heading for recession.

“The economic shock of the COVID-19 crisis is expected to be at its most severe in Q2 when GDP is expected to shrink by 6 per cent (by comparison, GDP shrank by 2 per cent at the height of the Global Financial Crisis).

“Passenger demand closely follows GDP progression. The impact of reduced economic activity in Q2 alone would result in an 8 per cent fall in passenger demand in the third quarter,” IATA said.

The global body explained that travel restrictions would deepen the impact of recession on demand for travel and the most severe impact is expected to be in Q2.

IATA disclosed that as of early April, the number of flights globally was down 80 per cent compared to 2019 in large part owing to severe travel restrictions imposed by governments to fight the spread of the virus.

Domestic markets, IATA said could still see the start of an upturn in demand beginning in the third quarter in a first stage of lifting travel restrictions.

International markets, however, would be slower to resume as it appears likely that governments will retain these travel restrictions longer.

According to IATA’s Director General and CEO, Alexandre de Juniac, “The industry’s outlook grows darker by the day. The scale of the crisis makes a sharp V-shaped recovery unlikely. Realistically, it will be a U-shaped recovery with domestic travel coming back faster than the international market.

“We could see more than half of passenger revenues disappear. That would be a $314 billion hit. Several governments have stepped up with new or expanded financial relief measures but the situation remains critical.

“Airlines could burn through $61 billion of cash reserves in the second quarter alone. That puts at risk 25 million jobs dependent on aviation. And without urgent relief, many airlines will not survive to lead the economic recovery.”