TOUGH TIMES

Airlines stare at Sh11.3 trillion hit on coronavirus spread - IATA

Kenya Airways has for instance suspended flights to China and those coming from Italy.

In Summary
  • The projected loss is more than Kenya's GDP currently at Sh9 trillion 
  • The association did not give loss estimates for Sub Saharan Africa despite massive cancellation of flights especially to Asia and Europe
China Southern Airline.
China Southern Airline.
Image: COURTESY

Airlines could lose up to $113 billion (Sh11.3 trillion) more than Kenya's Gross Domestic Product if the coronavirus spread continues unabated, according to the International Air Transport Association (IATA).

The association said losses would be similar to those experienced by the industry during the 2008 global financial crisis.

''We see 2020 global revenue losses for the passenger business of between $63 billion (in a scenario where COVID-19 is contained in current markets and $113 billion (in a scenario with a broader spreading of COVID-19),'' IATA said in a statement.

 
 

No estimates are yet available on cargo operations.

The new loss projection by IATA is almost 300 per cent up compared to $30 billion (Sh3 trillion) estimated two weeks ago, perhaps an indication of just how bad the virus has hampered the sector.

It said airlines could lose 19 per cent of their business if the virus isn't contained soon.

According to IATA, Italy and China are the most affected markets, plugging 24 and 23 per cent respectively, followed by Iran, South Korea, Japan, and Singapore at 16, 14, 12 and 10 per cent.

Additionally, Asia (excluding China, Japan, Singapore, and South Korea) would be expected to see an 11 per cent fall in demand while Europe (excluding Italy, France and Germany) would see a seven per cent drop in demand.

Globally, this fall in demand translates to an 11 per cent passenger revenue loss equal to $63 billion (Sh6.3 trillion).

'China would account for some $22 billion of this total. Markets associated with Asia (including China) would account for $47 billion of this total,'' IATA said.

 
 

The association did not give loss estimates for Sub Saharan Africa despite massive cancellation of flights especially to Asia and Europe.

''Financial markets have reacted strongly. Airline share prices have fallen nearly 25 per cent since the outbreak began, some 21 percentage points greater than the decline that occurred at a similar point during the SARS crisis of 2003,''IATA said.

Kenya Airways has for instance suspended flights to China and those coming from Italy.

Within one month of suspending its flights to China, the airline said it lost $8 million (Sh800 million).

On a positive note, the lobby said the drop in global oil prices would provide some relief but would not significantly cushion the devastating impact that COVID-19 has on demand.

''Oil prices have fallen significantly. This could cut costs up to $28 billion (Sh2.8 trillion) on the 2020 fuel bill,'' IATA said.

The virus which started in Wuhan, China two months ago has since spread to almost 100 countries globally including in seven in Africa.