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14 Feb, 2020 13:04

Airlines’ losses set to skyrocket due to Covid-19 travel ban – UN aviation agency

Airlines’ losses set to skyrocket due to Covid-19 travel ban – UN aviation agency

Extended flight cancellations to China amid the coronavirus outbreak could cut global carriers’ revenues up to $5 billion in the first quarter, according to the International Civil Aviation Organization’s (ICAO) estimates.

At least 70 airlines have canceled all international flights in and out of China and 50 others have reduced their operations in the country as the epidemic continues to spread, the agency said in a recent report. Thus, instead of a planned increase in passenger capacity, the companies saw a huge drop in passenger flows, losing from 16.4 to 19.6 million passengers compared to their earlier projections.

“This equates to a potential reduction of USD $4 to 5 billion in gross operating revenues for airlines worldwide,” the Montreal-based agency said. It added that Covid-19 may hit the industry even worse than the Severe Acute Respiratory System (SARS), which cost carriers $7 billion in 2002-2003, due to the greater extent of flight cancellations.

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Japan alone may lose $1.29 billion in tourism revenue due to a reduction in Chinese air travelers, the ICAO predicts. Thailand is also set to be hit hard, possibly losing $1.15 billion.

Some carriers, which had to suspend all flights to and from mainland China, have already calculated the costs of travel curbs linked to the epidemic. Vietnam’s flag carrier, Vietnam Airlines, announced on Thursday it was losing up to $10.8 million per week. Earlier this week, El Al Israel Airlines said that it expects a $30 million drop in first quarter revenue, hoping to partly offset the losses by lower operating expenses.

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Meanwhile, the Russian government said that it is hard to calculate all the losses for domestic air companies so far. On Friday, Russian Deputy Minister of Transportation Alexander Yurchik said local carriers may get compensation totaling 1.6 billion rubles ($25.2 million), but the discussion on the matter is still ongoing.

The number of cases of the flu-like virus has been surging over the past few weeks to almost 65,000 and the death toll nearing 1,400 people on Friday. The outbreak has been hitting both local business and international companies hard, as China is a vital part of the global supply chain.

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