Airlines around the world may surrender US$314 billion in ticket sales to the coronavirus this year, 25% more than previously expected, because of longer-than-expected lockdowns and the increasing toll on the global economy.
Social-distancing norms when air travel resumes could further hamper revenue, the International Air Transport Association said Tuesday.
The economic dislocation will eliminate 55% of the annual passenger revenue that global carriers were expected to generated before the crisis began, Brian Pearce, IATA's chief economist, said on a conference call.
The group's previous forecast for a US$252 billion revenue hit was issued three weeks ago.Expectations for a more severe recession will affect the speed at which air travel returns in the second half of the year, Pearce said.
The number of flights taking place worldwide was down almost 80% in the first part of April, with the industry virtually grounded outside of repatriation flights and the movement of cargo.
An uncertain recovery
With countries preparing to emerge from under strict lockdowns aimed at stemming the virus, carriers are starting to grapple with when and how the travel might return.
IATA said it expects domestic markets to reopen during the third quarter, followed by regional, continental and later intercontinental flights. The early experience of China, hit hard at the beginning of the year, has shown that international travel will be hardest to resume because countries are worried about imported cases.
"The scale of the crisis makes a sharp V-shaped recovery unlikely," IATA Director General Alexandre de Juniac said in a statement. "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."
IATA has previously estimated airlines may burn through US$61 billion in cash during the second quarter, while the safety precautions are at their peak.
Once travel returns, social-distancing safeguards may require airlines to leave one in three seats empty, de Juniac said on the call. This will hurt profitability on the short- and medium-haul routes that will open up first, and which require high occupancies to break even, he said.
The pace of the return will also have an impact on the aircraft manufacturing duopoly of Airbus and Boeing, and their constellation of suppliers that depend on fresh orders.
"For the next 8 to 12 months, we do not see a very strong aircraft demand coming from airlines that have absolutely no cash,â€ÂÂÂÂ de Juniac said on the call, predicting more reshuffling of the Boeing and Airbus order books. "We will have delays and cancellations."
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