A global airlines group says the COVID-19 outbreak could slash spending on airfares by US$63-billion, a loss that could swell to US$113-billion if the deadly illness becomes even more widespread.
The International Air Transport Association warning rattled stock markets, which have already plunged over the past two weeks amid fears the coronavirus will hammer business and consumer spending and tip the world into recession.
The IATA, which represents 290 airlines that collectively account for 82 per cent of global passenger traffic, issued two estimates Thursday of airlines’ lost revenue. The first scenario models a “limited” spread of the virus to countries with more than 100 cases and predicts an 11-per-cent drop in revenue, a loss of US$63-billion. The “extensive spread scenario” of markets that have at least 10 COVID-19 cases forecasts losses of US$113-billion, a 19-per-cent drop in seat sales.
“Financially, that would be on a scale equivalent to what the industry experienced in the global financial crisis,” the IATA said.
“In little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse,” said Alexandre de Juniac, the IATA’s chief executive officer. “Many airlines are cutting capacity and taking emergency measures to reduce costs.”
Airlines have scaled back or eliminated thousands of flights to China, Italy and other affected countries as consumers and businesses cancel travel plans to avoid contracting the respiratory illness.
The Canadian government has issued health warnings about travelling to a list of seven countries. The advisories range from avoiding non-essential travel (China, Iran and Northern Italy) to using “special precautions” (Japan, South Korea) or “usual precautions" (Singapore, Hong Kong).
Ahead of the busy March travel season, Air Canada has suspended flights to Beijing and Shanghai from Toronto, Vancouver and Montreal and to Hong Kong from Toronto. The Montreal-based carrier is waiving rebooking fees for travellers who bought tickets to certain airports in six affected countries.
The number of flights to China from Vancouver International Airport has fallen 50 per cent in February and March, a drop in overall passenger traffic of 3 per cent to 5 per cent, said Craig Richmond, the airport’s chief executive officer.
“That means some days the airlines are flying and some days they are not,” Mr. Richmond said in an interview.
Airlines flying to China from Vancouver include China Eastern, China Southern, China Airlines and Xiamen Air.
The plunge in traffic at Canada’s Pacific gateway follows a year in which demand for flights to Asia was already under pressure because of tensions in Canada-China diplomatic relations, protests in Hong Kong and the grounding of the Boeing 737 Max airplane. Vancouver airport is expecting 2020’s passenger count to fall to 25 million from 26.4 million in 2019, Mr. Richmond said. “We had already seen a slowdown, and then in January, the effect of COVID-19.”
Air Canada, Air Transat and three unions representing pilots and cabin crews at Canada’s airlines declined to comment for this story. “We do not discuss demand outside our quarterly reporting,” said Peter Fitzpatrick, an Air Canada spokesman. Leisure carrier Sunwing Airlines said in an e-mail that demand is strong going into March break because the regions it serves – the Caribbean, Mexico and Central America – are not affected by the virus.
Morgan Bell, a WestJet spokeswoman, said the Calgary-based carrier, which does not fly to Asia directly, has seen “isolated cancellations on certain flights” but has no plans to suspend routes.
Air Canada’s share price has fallen more than 24 per cent on the Toronto Stock Exchange since Feb. 21, outpacing the broad market’s drop of 7 per cent.
Aircraft operator and lessor Chorus Aviation Inc.’s share price fell 5 per cent Thursday after U.K. airline Flybe Ltd. stopped operations and was placed in administration. Flybe leased eight aircraft from Chorus and accounted for 5 per cent of the Halifax company’s profit. Chorus said Thursday it is in negotiations to repossess and find new markets for the aircraft.
The IATA said global airline share prices have plunged about 25 per cent since the COVID-19 outbreak began. The drop exceeds by 21 percentage points the share-price swoon seen during the SARS crisis of 2003.
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