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Business News of Friday, 21 February 2020

Source: bbc.com

Coronavirus outbreak to cost airlines almost US$30bn - IATA


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Airlines stand to lose $29.3bn (£23.7bn) of revenue this year due to the coronavirus outbreak, the global airline industry body has warned.

The International Air Transport Association (IATA) predicts demand for air travel will fall for the first time in more than a decade.

Airlines in China and other parts of the Asia Pacific region are expected to take the vast majority of the impact.

It comes as carriers around the world have been forced to reduce flights.

In total, airlines in the Asia Pacific region are set to see a $27.8bn revenue loss in 2020, while those outside Asia are expected to lose $1.5bn in revenue, IATA has forecast.

Of that figure, IATA predicts that carriers in China are set to lose revenue of $12.8bn in their home market alone.

"Airlines are making difficult decisions to cut capacity and in some cases routes," said IATA's director-general Alexandre de Juniac. "This will be a very tough year for airlines."

However, IATA cautioned it was too early to predict what this expected revenue loss would mean for airlines' profitability this year.

IATA said it had based its estimates on the slump in demand that was seen during the Sars (severe acute respiratory syndrome) outbreak in 2003. That was characterised by a six-month period that saw a sharp fall in demand followed by an equally quick recovery.

That year Sars was responsible for the 5.1% fall in demand for airlines in the Asia-Pacific region.

The forecast also assumes that the virus remains centred on China, but IATA warned the effect could be far worse if the infection spreads further in the region.

IATA has previously forecast that the Asia Pacific region would be the biggest driver of air travel demand between 2015 and 2035, with four of the five fastest-growing markets in terms of passengers being from Asia.

On Thursday, two major airline groups warned of a severe financial impact as a result of the coronavirus hitting demand for travel in Asia.

Australia's Qantas said the outbreak would cost it up to 150m Australian dollars ($99m; £76m), while European carrier Air-France KLM put the cost at up to €200m ($213m; £168m) for the period between February and April.

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