Airlines to lose $5B from COVID-19

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The International Civil Aviation Organization (ICAO) sees the global airline industry incurring potential gross revenue losses of between $4 billion and $5 billion in the first quarter this year from cancelled international flights to or from mainland China following the travel ban due to corona virus disease COVID-19.

ICAO said some 70 airlines have cancelled all international flights to or from mainland China, and another 50 airlines have curtailed air-related operations including the Philippines’ carriers.

ICAO in its preliminary forecasts relating to the expected economic impact of COVID-19 travel ban sees an overall reduction ranging from 39 percent to 41 percent of passenger capacity, or a reduction of 16.4 to 19.6 million passengers compared to what airlines had projected.

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This equates to a potential reduction of $4 billion to $5 billion in gross operating revenues for airlines worldwide.

This has resulted in an 80 percent reduction of foreign airline capacity for travellers directly to or from China, and a 40 percent capacity reduction by Chinese airlines.

Prior to the outbreak, airlines had planned to increase capacity by 9 percent on international routes to or from China for the first quarter of 2020.

The estimate revenue cut does not include potential impact due to reductions in international air freight movements on cargo-only aircraft, airports, air navigation service providers, to Chinese domestic air traffic, or to international traffic with respect to the Hong Kong and Macau Special Administrative Regions of China, or Taiwan.

ICAO said the impact of COVID-19 is expected to be greater than what was caused by the 2003 SARS epidemic in light of the higher volume and greater global extent of the flight cancellations being seen.

Seasonal passenger load factors are another extenuating factor, as is the fact that China’s international air traffic has doubled, and its domestic traffic increased five-fold, since the 2003 period.

In the Philippines, the three local airlines, Philippine Airlines, Cebu Pacific and AirAsia Philippines are projected to incur P3 billion losses due to the refund to passenger for over two months on suspended flights to China, Hong Kong and Macau, according to the Air Carriers Association of the Philippines Inc.

The Department of Tourism had said the Philippines may lose up to P16 billion in tourism revenues in February this year, because of restrictions on travellers, According to Civil Aeronautics Board, 465 flights are cancelled a week due to COVID-19.

The travel ban was imposed starting February 2, the same day the health department announced the first COVID-19 fatality in the Philippines.

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