Airlines warn that the global demand for air travel has dropped for the first time since the worldwide recession in 2008. The drops in demand come most significantly in the Asia-Oceanic region in light of the Coronavirus epidemic.
IATA’s air travel growth estimate is down about 4.7% from their previous forecast numbers that were made only two months ago, well before the outbreak of the disease-causing alarms for a global health emergency.
These reductions in overall demand are most pronounced in China, where the country has a huge aviation market, as well as the entire region of Southeast Asia, which is the area that IATA predicts the most growth long-term as the global population continues to grow.
“This will be a very tough year for airlines,” Alexandre de Juniac, IATA’s director-general, said on Thursday, February 20th. “Airlines are making difficult decisions to cut capacity and in some cases routes.” And, even more recently, news came out surrounding Hainan's decision to further cut back on staff, mostly flight attendants due to the lack of demand and route utilization.
It’s too presumptive to forecast the impact on profitability, however, IATA said that the outbreak will shave about $30 billion from revenue, with the brunt of it on Chinese airlines.
China’s government has stepped up efforts to contain the damage and has mulled investing in government cash bailouts to help the airlines whether the revenue crash caused by the epidemic.
The financially-troubled conglomerate HNA Group (Hainan Airlines), is expected to be taken over and its airline assets sold. China plans to sell the bulk of Hainan’s airline assets to the country’s three biggest carriers: Air China, China Southern Airlines, and China Eastern Airlines.
The Hainan-backed Suparna Airlines is also likely to be turned over to the Jiangsu provincial government.
Globally, international airlines have canceled thousands of flights to China, and about 80% of the country’s domestic fleet is grounded because of the lack of demand and mandatory quarantine enacted on half of the population of China by the government.
1.7 million seats were dropped from international China services from late January to mid-February, according to OAG Aviation Worldwide. Also, Chinese airlines have cut 10.4 million seats domestically.
While the financial impact of the Coronavirus epidemic will be felt strongest in China, other carriers outside of the Asia-Pacific air travel region would lose about $1.5 billion in revenue, the IATA predicted. The Air France-KLM group has said that the outbreak will wipe as much as 200 million euros ($216 million) from their yearly profit due to the lack of demand and route cancellations to a highly desirable Chinese market.
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