Updated analysis suggests airlines passenger revenues will drop by $314 billion in 2020, a 55% decline against 2019.
The International Air Transport Association (IATA) has updated its estimate from the 44% fall ($252 billion in lost revenues) it predicted on March 24, which was based on a scenario with severe travel restrictions lasting three months.
The updated figures reflect a significant deepening of the coronavirus crisis since then, including three months of severe domestic restrictions, some international travel restrictions lasting more than three months, and a larger impact on Africa and Latin America than previously thought.
Full-year passenger demand (domestic and international) is expected to be down 48% compared to 2019.
Iata said ‘the world is heading for recession’ and that ‘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%’.
It noted that passenger demand ‘closely follows GDP progression’ and that reduced economic activity in Q2 would hit passenger demand in Q3.
“The industry’s outlook grows darker by the day,” said Iata’s director general Alexandre de Juniac. “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.”
Iata called on governments to include aviation in stabilisation packages. De Juniac added: “Financial relief for airlines today should be a critical policy measure for governments. Supporting airlines will keep vital supply chains working through the crisis. Every airline job saved will keep 24 more people employed. And it will give airlines a fighting chance of being viable businesses that are ready to lead the recovery by connecting economies when the pandemic is contained. If airlines are not ready, the economic pain of COVID-19 will be unnecessarily prolonged.”
Iata proposed that governments offer direct financial support to passenger and cargo carriers; loans, loan guarantees and support for the corporate bond market; and tax relief to see airlines through the crisis.