CORONAVIRUS

Airlines foresee global traffic drop

It would be the first dip since 2003

#x201c;This will be a very tough year for airlines,#x201d; says Alexandre de Juniac, International Air Transport Associa
“This will be a very tough year for airlines,” says Alexandre de Juniac, International Air Transport Association’s director general. (Associated Press)

The airline industry expects the annual decline in global passenger demand in 17 years, after tallying up the initial impact of the thousands of flights canceled because of the coronavirus outbreak in China.

The estimate shaves about 4.7 percentage points off a passenger-traffic forecast issued just two months ago, with almost all of the impact in the Asia-Pacific region, according to the International Air Transport Association.

That may be conservative. The projections assume the losses will be limited to markets linked to China.

“This will be a very tough year for airlines,” Alexandre de Juniac, IATA’s director general, said in a statement. “Airlines are making difficult decisions to cut capacity and in some cases routes.”

The drop would be the first overall decline since the SARS outbreak in 2003. Global passenger demand is now seen contracting by 0.6 percent this year, compared with a December forecast for 4.1 percent growth, IATA said.

While it’s too early to forecast the effect on profitability, IATA said the outbreak will shave as much as $30 billion from revenue, with the effect most severe on Chinese airlines.

China’s government has stepped up efforts to contain the damage. Indebted conglomerate HNA Group is expected to be taken over and its airline assets sold, Bloomberg News reported.

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While the impact will be felt strongest in China, carriers outside of Asia-Pacific would lose about $1.5 billion in revenue, IATA said.

A warning from Air France-KLM, which said the outbreak will wipe as much as $216 million from earnings, hammered home the point on Thursday.

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