IATA calls for aviation tax breaks as $113 billion in damage from outbreak

“We call on the government to take into account airline-related tax deductions and flight schedule slinging when introducing incentives. This is an extraordinary period for the air transport industry. De Juniak stressed. On March 5th the International Air Transport Association (IATA) announced in its latest financial impact forecast on the global air transport industry that the global passenger transport business will lose between $63 billion and $63 billion in 2020 (data is based on March 2). Between 113 billion U.S. dollars (in the case of a wider spread of the epidemic) in countries with more than 100 confirmed cases of new coronary pneumonia.

Earlier, IATA had issued forecasts for China-only routes with a loss of $29.3billion in revenue. But with the new corona epidemic spreading to more than 80 countries, IATA noted that ticket bookings on routes outside China have also been severely affected.

“Many airlines are cutting capacity and taking urgent steps to reduce costs,” said Alexandre de Juniac, IATA’s president and chief executive. The government must note that airlines are doing everything they can to help themselves and keep the connected global economy asafe. “

“We call on the government to take into account airline-related tax deductions and flight schedule slinging when introducing incentives. This is an extraordinary period for the air transport industry. De Juniak stressed.

IATA calls for aviation tax breaks as $113 billion in damage from outbreak

Airline shares fall nearly 25% after outbreak

IATA, which has 290 member airlines worldwide and accounts for 82% of the world’s regular international flights, is an important indicator of the industry.”

In its latest forecast, IATA noted that financial markets had reacted strongly to the current situation. In the wake of the outbreak, airline shares have fallen nearly 25 percent, about 21 percentage points more than similar declines during SARS in 2003. To a large extent, the fall has had a bigger impact on industry revenuethanly than previous analysis.

Considering the escalation of the outbreak of new coronary pneumonia, IATA forecasts the potential impact on passenger revenue based on two possible scenarios, namely, the limited spread of the outbreak mentioned above and the widespread spread of the outbreak.

With the outbreak limited, IATA expects demand to decline sharply in countries and regions with more than 100 confirmed cases as of March 2, followed by a V-type recovery. Of course, it also takes into account the decline in consumer confidence in North America, Asia Pacific and Europe.

After the outbreak, the expected number of passengers that had spread to the market declined sharply: China (-23%), Japan (-12%), Singapore (-10%), South Korea (-14%), Italy (-24%), France (-10%), Germany (-10%) and Iran (-16%). In addition, demand in Asia (excluding China, Japan, Singapore and South Korea) is expected to fall by 11%. Demand in Europe (excluding Italy, France and Germany) will fall by 7%, and in the Middle East (excluding Iran) by 7%.

Globally, falling demand means an 11% reduction in global passenger revenue, equivalent to $63 billion. Losses in China are expected to be around $22 billion, while losses in Asian-related markets, including China, are expected to be as high as $47 billion.

IATA calls for aviation tax breaks as $113 billion in damage from outbreak

In the case of the second scenario, where the outbreak is widespread, IATA continues to use a scenario-like assessment method, but the data range extended to all countries and regions where there were more than 10 confirmed cases of new coronary pneumonia on 2 March.

In this scenario, global passenger revenue losses will reach 19%, equivalent to $113 billion. Financial data are equivalent to the scale of losses suffered by the air transport industry during the global financial crisis.

IATA calls for aviation tax breaks as $113 billion in damage from outbreak

Large oil price cushion gives aviation industry a buffer

IATA also points out that the sharp drop in oil prices since the beginning of the year (the price of Brent crude oil is down $13 a barrel) could save airlines $28 billion in costs in 2020 (in addition to reducing operational savings).

However, IATA noted that while oil prices are good, they have not significantly mitigated the impact of the outbreak. In addition, the impact of lower oil prices on companies by airlines that engage in fuel hedging operations will lag behind.

IATA calls for aviation tax breaks as $113 billion in damage from outbreak

“There is little precedent for the crisis caused by the outbreak of new coronapneumonia. In just over two months, the operational prospects of the air transport industry in most parts of the world have deteriorated rapidly. “It’s not clear how the outbreak will develop, but it’s a crisis whether it’s a $63 billion loss that only takes into account limited transmission or $113 billion in widespread transmission,” de Juniac said. “

Earlier, on February 13th Airbus said it expected to deliver about 880 commercial aircraft this year without “significant disruption, including the new crown outbreak”. However, according tomedia reports, people familiar with the matter said the company is currently in discussions with airline customers about possible delays in delivery.

An industry executive said many airlines were unable to pick up flights because they were still subject to travel restrictions. “Time is a big problem, ” says one aviation executive. ” Talks with airlines are ongoing, but no major changes have been discussed. “

Notably, the spread of the new crown outbreak outside Asia has also hit so-called “super connector” airlines such as Emirates and Qatar Airways. The growth strategies of these airlines are based primarily on connecting Far East cities to the Middle East, Africa, Europe and the Americas.

While airlines around the world are freezing hiring and investment and taking urgent steps to protect profitability, aviation analysts say some of the weaker carriers are at risk of collapse.

Andrew Lobenberg, aviation analyst at HSBC, said in a note that under the basic stake, european-listed airlines could see their earnings fall in 2020 from an 87 per cent drop in Air France’s KLM group to a 23 per cent drop in Wizz Air in Hungary. % varies.

“During this time, airlines must balance action against taking advantage of the recovering needs,” Mr Lobenberg said. “