Dubai — Global airlines could rack up losses of up to $113 billion this year if the coronavirus outbreak worsens, which would be on the scale of the financial costs for the aviation industry during the financial crisis of 2008, the International Air Transport Association said Thursday.
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In its broader scenario of an extensive spread of the epidemic, China and Asia Pacific will account for $57.3 billion of the $113 billion estimated loss, IATA said in a new report. The second most affected region would be Europe with a $43.9 billion loss, followed by the US and Canada with a combined loss of $21.1 billion and the Middle East at $7.2 billion. IATA's previous estimate published February 20 envisaged a $29.3 billion loss for global airlines.
In IATA's scenario for a limited spread of the virus, global losses would amount to $63 billion, followed by a V-shaped recovery, which is equal to an 11% plunge in worldwide passenger numbers, the association said.
"It is unclear how the virus will develop, but whether we see the impact contained to a few markets and a $63 billion revenue loss, or a broader impact leading to a $113 billion loss of revenue, this is a crisis," said Alexandre de Juniac, IATA's director general and CEO.
"As governments look to stimulus measures, the airline industry will need consideration for relief on taxes, charges and slot allocations. These are extraordinary times."
Countries with more than 100 cases now account for more than 27% of global passenger travel, IATA said.
Airlines are cutting capacity and laying off staff or asking them to take unpaid leave as countries around the world ban flights to and from countries where the virus has spread. The outbreak has killed over 3,280 and infecting some 95,000 others as it spreads to over 80 countries. Besides China, among the hardest hit countries are South Korea, Italy and Iran, where the spike in cases has stoke fears of a global pandemic that will crimp world growth this year.
Last week oil prices had their worst weekly loss since the 2008 financial crisis and as cases of the virus outside China surged. Prices have since partly recovered as countries implement stimulus measures and OPEC+, the 23-member alliance led by Saudi Arabia and Russia, meets in Vienna Thursday and Friday to consider whether to deepen oil production cuts from the second quarter of 2020.
The alliance is currently trimming 1.7 million b/d from global markets and the current proposal suggests an additional cut of up to 1.5 million b/d.
The fall in oil prices, which are down some 25% so far this year, could offset some of the losses, IATA said.
To weather the impact of the virus, the International Monetary Fund has earmarked $50 billion to help countries cope with the epidemic, while the US Federal Reserve has slashed interest rates by 0.5% to help the US cope with the economic fallout of the outbreak.