Coronavirus & Airline Revenue: Almost $5 Billion Lost In First Quarter
The coronavirus outbreak has wreaked havoc on the global tech industry with high-profile events being cancelled and wide scale disruption to supply chains following factory closures in mainland China.
But airline revenues have also been impacted – with consumers, tech employees and tourists alike cancelling their international travels in masses, airline revenues are set to fall by $4 billion to $5 billion in the first quarter of 2020.
That’s according to a forecast from the UN’s International Civil Aviation Organisation (ICAO). The recent report from the Montreal-based agency warned that the virus, which has infected 64,000 people worldwide and killed up to 1,400, would have greater economic 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, which will result in an 80 per cent reduction of foreign airline capacity for travellers to and from China, as well as a 40 per cent capacity reduction by Chinese airlines.
The estimated $4 to $5 billion hit to global airline revenues comes from around 40 per cent reduction in passenger capacity in the first quarter – almost 20 million passengers less than what airlines had projected for the period.
According to similar findings from OAG, a firm that analyses 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 plummeting declines in airline travel, Japan has lost the most – with 16 per cent of its total international flight capacity in recent weeks, according to OAG.
That’s resulting from around 60 per cent of all traffic between Japan and China being impacted.
ICAO’s forecast for the first quarter of 2020 sees Japan losing $1.29 billion in tourism revenue resulting from the drop in Chinese travellers, while another neighbouring country that’s been affected – Thailand, could lose $1.15 billion.
Crucial statistics from the report reveal that flights coming in and out of China accounted for around 5.2 per cent of all international flight capacity a month ago. Earlier this week, however, that number had fallen to 1.8 per cent according to OAG’s data.
While global airlines have taken a significant hit from the coronavirus outbreak, OAG highlights 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 fret 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 per cent to 0.3 per cent, with the US first quarter growth could take a 0.2 per cent to 0.4 per cent hit.
Estimates for China’s first quarter GDP now range from 0 per cent to around 5 per cent, down from 5.9 per cent current annual projected growth rate.
The SARS epidemic, by comparison, knocked off 2 per cent of China’s GDP yearly growth and was estimated to have cost the global economy up to 0.3 per cent, Time reports.
The UN’s International Civil Aviation Organisation’s (ICAO) report can be viewed here.