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As UK regional carrier Flybe went into liquidation this morning, following low demand on top of already challenging finances, IATA predicted global revenue losses for the passenger business of between $63bn and $113bn.
Its previous prediction, for ‘just’ $29.3bn, was based on a scenario that confined the impact of coronavirus to markets associated with China.
Now it has spread to more than 80 countries, travel restrictions and low demand have become a global phenomenon.
IATA said it could not yet estimate the impact on cargo – currently a very different beast to passengers.
While cargo has had a rough four weeks (see today’s volatility article), prices are currently surging for those carriers able to offer capacity.
One source has reported intra-Asian maindeck charter flights costing upwards of $750,000, while another said: “He with the highest bid wins. Imagine what it will be into Europe when the market gets really screwed, in two or three weeks.”
Cargo, then, may possibly be able to withstand the bleak start to the year, but the passenger carrying sisters have a tougher outlook.
Airline share prices have fallen nearly 25%, but on the plus side, oil prices have tumbled – down $13/ barrel since January – although hedging will postpone that benefit for some.
“The turn of events as a result of Covid-19 is almost without precedent,” said Alexandre de Juniac, IATA’s director general. “In little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse.
“It is unclear how the virus will develop, but whether we see the impact contained to a few markets and a $63bn revenue loss, or a broader impact leading to a $113bn loss of revenue, this is a crisis.
“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,” he concluded.
More details from IATA are available here.