"COVID-19 Causes $27.8 Billion Revenue Decline for Asia-Pacific Airlines This Year"

IATA "Airlines Exposed to Chinese Market Will Face Financial Impact"

On the 4th, passengers arriving on flights from China are entering through a dedicated immigration area at Incheon International Airport Terminal 1, wearing masks. / Yeongjongdo = Photo by Kim Hyun-min kimhyun81@

[Asia Economy Yoo Je-hoon] Due to the impact of the novel coronavirus infection (COVID-19), it is forecasted that the revenues of airlines in the Asia-Pacific region will decrease by $27.8 billion (approximately 33.5 trillion KRW) this year. For domestic airlines, such as low-cost carriers (LCCs) that heavily depend on the Asia-Pacific region, this signals a critical warning in their business environment.

The International Air Transport Association (IATA) announced on the 20th (local time) that this prediction was made following an initial assessment of COVID-19's impact. IATA is an international civil aviation organization comprising airlines worldwide.

IATA analyzed the current COVID-19 situation based on the fact that during the 2003 Severe Acute Respiratory Syndrome (SARS) outbreak, air travel demand plummeted for six months before sharply recovering in a 'V-shaped curve.' As a result, air passenger demand in the Asia-Pacific region due to COVID-19 is expected to decrease by 13% annually. Considering that the Asia-Pacific region's air passenger demand was initially forecasted to increase by about 4.8% this year, IATA explained that the actual decline is estimated to be 8.2%.

Due to this demand decrease, the revenues of Asia-Pacific airlines are projected to drop by approximately $27.8 billion this year. In particular, Chinese airlines are estimated to suffer revenue losses amounting to $12.8 billion (about 15.42 trillion KRW) solely in the domestic market.

Airlines based outside the Asia-Pacific region are also inevitably facing revenue declines. IATA forecasted that global air passenger demand, including the Asia-Pacific region, will decrease by 0.6% compared to the previous year, with revenue losses predicted to reach $29.3 billion (approximately 35.3 trillion KRW).

Alexandre de Juniac, IATA Director General, stated, "This could be the first time since the 2008-2009 global financial crisis that worldwide air passenger demand declines," adding, "The sharp demand drop caused by COVID-19 will have a severe financial impact on airlines exposed to the Chinese market."

The performance outlook for domestic airlines, which heavily rely on Asia-Pacific routes, is also not optimistic. Earlier, financial information firm Infomax analyzed that Korean Air's operating profit consensus for the first quarter of this year decreased by 10.30% within a month. Considering that the upcoming second quarter is traditionally an off-season, the performance outlook remains bleak.

An industry insider said, "Due to COVID-19, demand has sharply declined not only for international flights but also for the mainstay domestic flights, making it feel like a physical fitness test," adding, "At present, there is no choice but to wait for the COVID-19 situation to calm down quickly."

This content was produced with the assistance of AI translation services.