IATA Update Projects Over Half of 2020 Passenger Revenues at Risk Due to Global COVID-19 Pandemic
The International Air Transport Association (IATA) released an updated analysis on Tuesday which projects a $314B drop in passenger revenues for 2020, a 55% decline versus 2019. IATA previously estimated a passenger revenue decline of $252B on March 24, 2020.
On Tuesday, the International Air Transport Association (IATA) updated their projections on the loss of passenger revenue for 2020 to $314 billion from $252 billion previously announced on March 24, 2020. This represents an increase in the projected decline from 44% to 55% versus 2019. The new projections are based on parameters including severe domestic travel restrictions for three months, some international travel restrictions lasting beyond three months, and a severe impact worldwide, including Africa and Latin America. In IATA's previous analysis Africa and Latin America had not yet been substantially impacted by the global COVID-19 pandemic. Full-year domestic and international passenger demand is now expected to decline by 48% compared to 2019.
IATA’s analysis is based on a combination of overall economic developments and travel restrictions. With the world heading into a recession, GDP is expected to contract by 6 percent during the second quarter, whereas at the height of the global financial crisis GDP declined by only 2 percent. According to IATA, the second quarter GDP contraction alone would result in a third quarter fall in passenger demand by 8 percent, as demand closely follows GDP progression. Travel restrictions will exacerbate the impact of the recession and travel demand with the most severe impacts expected in the second quarter as global flights have been reduced by 80 percent. IATA expects an upturn in domestic demand in the third quarter when the first stage of travel restrictions will likely be eased, while international demand is expected to take longer to recover due to government travel restrictions. In Tuesday’s announcement, IATA’s Director General and CEO, Alexandre de Juniac said,
“The industry outlook grows darker by the day. The scale of the crisis makes a sharp V-shaped recovery unlikely. Realistically, it will be a U-shaped recovery with domestic travel coming back faster than the international market. We could see more than half of passenger revenues disappear. That would be a $314 billion hit. Several governments have stepped up with new or expanded financial relief measures, but the situation remains critical. Airlines could burn through $61 billion in cash reserves in the second quarter alone. That puts at risk 25 million jobs dependent on aviation. And without urgent relief, many airlines will not survive to lead the economic recovery.”
IATA continues to recommend government aviation stabilization packages including direct financial support, loans and loan guarantees, support for the corporate bond markets by governments and central banks and tax relief. Suggested tax relief schemes include 2020 payroll tax rebates as well as a temporary suspension of ticket taxes and other government-imposed levies. The global airline industry supports 65.5 million jobs worldwide, where each of the 2.7 million airline jobs indirectly support 24 additional jobs in the economy. Speaking on the critical need for government stabilization packages, Mr. de Juniac added,
“Financial relief for the airlines today should be a critical policy measure for governments. Supporting airlines will keep vital supply chains working through the crisis. Every airline job saved will keep 24 more people employed. And it will give airlines a fighting chance of being viable businesses that are ready to lead the recovery by connecting economies when the pandemic is contained. If airlines are not ready, the economic pain of COVID-19 will be unnecessarily prolonged.”
The International Air Transport Association (IATA) represents 290 airlines worldwide, which make up around 82 percent of total air traffic.