Coronavirus will cost airlines $490 billion, and counting

Airlines will be hammered by a US$314bn (A$490bn) loss in ticket sales in 2020 alone.

By Bloomberg News, April 15 2020
Coronavirus will cost airlines $490 billion, and counting

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€Â 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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This article was published under license from Bloomberg Media and the original article can be viewed here

QF

11 Jul 2014

Total posts 411

Virgin will be the test case for what help Qantas should get with a long and protracted grounding of it's international fleet. We really aren't operating in a Capitalist environment at the moment.

Qantas - Qantas Frequent Flyer

22 Nov 2019

Total posts 19

Each third empty seat sounds good to me

31 Mar 2020

Total posts 5

''Each third empty seat sounds good to me''

Wow, that's great, i can stretch out get some sleep,

then reality struck, who will pay for those empty seats,

i'd better start saving as i need to long haul to Europe.

I'll have to pay for the empty seats.

05 Feb 2020

Total posts 6

I regularly fly to and from Sydney Dallas and have wondered for quite awhile if regulations would be introduced one day to make the seating in economy more humane. A regulated number of toilets to passenger ratio would also be a treat.

Perhaps ergonomics and passenger safety will finally kick in with some regulation. Its a stark contrast to think of social distancing when on some flights Ive been should to shoulder with people on each side, regularly making contact and enduring someone behind me coughing away. Its time for change !!

02 Nov 2017

Total posts 3

What I don't understand is that ticket prices aren't being discounted, for July at least. Maybe it's the intentional reduced availability but I'd have thoughts the airlines would offer a few inducements to get the public flying again

QF

11 Jul 2014

Total posts 411

Prices have already started to go up and if VA isn't a competitor straight away then they will go through the roof.


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