Airlines Down as Group Warns Coronavirus Could Cut $29 Billion of Revenue

Airline stocks are lower after a report said the coronavirus outbreak could cost air carriers in the Asia-Pacific region $29 billion of revenue in 2020.
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Airline stocks were lower after the International Air Transport Association warned that the deadly coronavirus outbreak could cut $29 billion from 2020 revenue for air carriers in the Asia-Pacific region.

At last check United Airlines Holdings (UAL) - Get Report was down 2.5% to $77.93, American Airlines (AAL) - Get Report was off 3.1% to $27.63, and Delta Air Lines (DAL) - Get Report was down nearly 2% to $57.23.

The trade group for global airlines said $12.8 billion would be lost in China's domestic market alone. 

The initial assessment of the impact of the coronavirus shows a potential 13% full-year loss of passenger demand for carriers in the Asia-Pacific region.

"We estimate that global traffic will be reduced by 4.7% by the virus, which could more than offset the growth we previously forecast and cause the first overall decline in demand since the global financial crisis of 2008-09," Alexandre de Juniac, IATA’s director-general and CEO, said in statement. 

"And that scenario would translate into lost passenger revenues of $29.3 billion."

"This will be a very tough year for airlines,” he added.

Considering that growth for the region’s airlines was forecast at 4.8%, IATA said, the net impact will be an 8.2% full-year contraction compared with 2019 demand levels.

In December, IATA forecast global revenue passenger kilometer growth of 4.1%, meaning the projected loss would more than eliminate expected growth this year. And that would mean a 0.6% global contraction in passenger demand for 2020.

International airlines and the three largest U.S. airlines have suspended flights to China in light of the outbreak. Many countries are warning their citizens not to travel to China or are barring travelers from China.

The association said the estimates are based on a scenario in which Covid-19 has a V-shaped impact on demand. That was the case during the SARS outbreak, which was marked by a six-month sharp decline followed by an equally quick recovery.

In 2003, SARS was responsible for a 5.1% fall in RPKs for Asia-Pacific airlines.

OAG, which tracks airline data, said the latest information for the week beginning Feb. 17 shows a further reduction in international capacity from China of 270,000 seats a week. That brings the overall capacity reduction since Jan. 20 to 1.7 million seats, a near 80% reduction.

Japan, Thailand and Taipei are the largest losers of capacity week over week, the U.K. travel-data provider OAG said.

The coronavirus outbreak began in China late last year. The country's National Health Commission reported a total of 75,465 confirmed cases of the virus and 2,236 deaths. The World Health Organization's numbers are higher: 76,767 confirmed cases and 2,247 deaths.

South Korea report of 100 new cases of the coronavirus for a total of 204.