In a new, 44-page study titled “Effects of Novel Coronavirus (COVID‐19) on Civil Aviation: Economic Impact Analysis,” the Montreal, Canada-based International Civil Aviation Organization (ICAO) delivers a gloomy outlook on commercial aviation. If the predicted, longer-lasting U-shaped development becomes reality, the existence of many carriers is threatened, with only the fittest and/or state-aided airlines surviving.
When the great mass extinction of airlines will begin is not addressed by ICAO. In its study, the organization concentrates on outlining the different scenarios for the industry in the coming
months. And those range, metaphorically speaking, from dark grey to deep black.
2 basic trajectories
In a nutshell, these are the key findings:
Preliminary estimates indicate the COVID-19 impact on scheduled international passenger traffic during first half 2020 varies between an overall seat reduction of 47% (Scenario 1) to 58% (Scenario 2) offered by airlines. If so, the number of potential air travelers put off by COVID-19 could total 503 million (V-shaped Scenario as “optimistic” option) or even total 607 million (worst estimate – U-contoured Scenario) during the first half year. In either case, airlines would face an immense loss of gross operating revenues ranging from approximately USD 112 to 135 billion, depending on V or U development, says ICAO.
V, U, or W
While previous pandemics had a V-shaped impact on aviation, evidenced by SARS (2003), the two Avian Flus (2003 and 2013), or the MERS-CoV disease in 2015, leading to rather fast aviation industry recoveries, Covid-19 tends to paralyze societies and economies for a longer period of time, thus taking on a stretched U-shape or, even worse, a W-contour with new regional peaks in between.
The biggest overall impact is expected in Europe and Asia/Pacific, followed by North America and the Middle East. Africa, where the pandemic is spreading extremely rapidly lately, is given rather little consideration because of poor data delivered by local authorities.
ICAO points out that not only international, but also domestic and regional air transport has been significantly impacted.
In March, seat capacity on short and medium-haul routes went south by 24% on a global scale in a y-o-y comparison. Most G7 economies report a sharp decrease of expenditures in air travel due to containment measures, such as Canada (-22%), Germany (-18%) France and the UK, (both -16%), with the USA less affected (-11%).
This will lead to a loss of between US$ 300 to 450 billion in international tourism receipts for 2020, predicts the United Nation’s World Tourism Organization (UNWTO). A huge disaster for many economies.
Tentative recovery, but when?
Looking ahead, ICAO expects aviation to slowly pick up again by the end of this month or early May and grow tentatively from there week after week. That is the optimistic version. In contrast, its gloomier outlook predicts a further decline until mid-summer followed by a moderate upswing afterwards.
Should the pessimistic version come true, airlines would lose US$ 35 to 40 billion gross operating revenues every month in the 3rd quarter 2020, hitting summer travel peak season, especially in Europe and North America, ICAO warns.
The consequences for countries, where tourism is an important source of income, such as Spain, Italy, Greece, France, many of the Caribbean islands, South Africa, Egypt, Morocco or even Dubai, are likely to be devastating. In addition to the economic stagnation caused by the pandemic, their travel industries are facing dire seasons in case air traffic does not revitalize soon.
Cargo is hit less hard
However, not only carriers are heavily affected by the COVID-19 avalanche, so are airports. They will lose more or less US$ 76 billion for full year 2020, ICAO states, citing figures collected by Airports Council International (ACI).
For air freight, the association paints a differentiated picture. While overall tonnage went down 19% last March due to the grounding of passenger jetliners leading to a withdrawal of lower deck transport capacity, cargo flown on board of freighters grew by 9% compared to March 2019.
In concluding, ICAO points out in their study that the impact of COVID-19 on air freight is still under preparation. So, more is to come.
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