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IATA: Coronavirus Impact On Airlines Could Reach $113 Billion

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IATA: Coronavirus Impact On Airlines Could Reach $113 Billion

The International Air Transport Association now predicts the coronavirus will cause a much bigger loss in revenues for commercial airlines this year. IATA expects total revenue losses between $63 billion and $113 billion depending on the spread of the virus.

The losses are much larger than the $30 billion estimated two weeks ago when the virus was largely confined to China.

No estimates are yet available for the impact on air cargo operations.

The warning comes as U.K. regional airline Flybe, which received some emergency funding from Virgin Atlantic last year, said COVID-19 was partly to blame for its collapse. It went into bankruptcy, leaving passengers stranded at airports today.

Airlines around the world have suspended most flights to mainland China and reduced flight schedules throughout Asia, Italy and other destinations, mostly to reduce costs due to the steep falloff in corporate and leisure travel bookings and some travel restrictions imposed by governments.

On Thursday, Deutsche Lufthansa AG said it was canceling all group flights to Israel as of March 8 because authorities there have banned entry of travelers from Austria, Germany and Switzerland. The halt in operations covers Lufthansa, SWISS and Austrian Airlines through March 28. Together the three airlines operate 10 daily flights to Tel Aviv and one to Eilat.

On March 4 Delta Air Lines pruned the number of flights it operates between the U.S. and Japan

In response to the decline in passenger travel, airlines are slashing flight schedules and supply purchases, while trying to minimize labor expense as the need for flight crews diminishes. 

As previously reported, Lufthansa has aggressively moved to reduce operating costs to minimize profit damage. Through March it will cancel about 7,100 flights, many on domestic routes and to Iran and Italy. Route cancellations amount to about 25% of seat capacity, the equivalent of 125-short-and-medium haul aircraft and 25 long-haul aircraft. The German airline has temporarily stored 23 aircraft. And the airline is reducing labor costs through unpaid leave, reduced hours and a hiring freeze?

On Wednesday, United Airlines said it was reducing its international schedule by 20% in April and May and its U.S. and Canadian schedules by 10%. It is also offering voluntary unpaid leaves and select reductions in work schedules, has implemented a hiring freeze through mid-summer, suspended management and administrative pay increases, and postponed training classes.

The most lucrative business for airlines is corporate travel, but many large companies such as Amazon are restricting business travel. As a result, many industry conferences are being canceled. On Thursday, U.S. Customs and Border Protection announced that its annual Trade Symposium, scheduled for March 10-11 in Anaheim, California, has been postponed. 

Other freight-related conferences that have been canceled or postponed this week include the TPM container shipping event in Long Beach, California and IATA's World Cargo Symposium in Istanbul March 10-12.

Amazon and Netflix now say they are pulling out of the South by Southwest music and tech festival in Austin, Texas, as the coronavirus spreads in the U.S. Previously, Facebook (NASDAQ: FB), Intel Corporation (NASDAQ: INTC) and Twitter Inc (NYSE: TWTR) all said they would not participate.

Analysts say airlines may begin to offer discounts to encourage domestic leisure travelers in the U.S.

Image Sourced from Pixabay

 

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