SINGAPORE: The coronavirus epidemic could cost passenger airlines up to US$113 billion in lost revenue this year, an industry body warned on Thursday (Mar 5), more than three times a projection it made just two weeks ago as the virus continues to spread around the world.
The warning from the International Air Transport Association (IATA) came as British regional carrier Flybe became the first big casualty of the slump in travel demand due to the crisis and Norwegian Air scrapped its profit forecast for this year.
"We all hope that COVID-19 will burn itself out when the summer comes," said Senior Minister of State for Transport Lam Pin Min, who attended an IATA workshop in Singapore on Thursday.
"But we must be prepared for a scenario whereby COVID-19 becomes a full-blown global pandemic that remains with us for some time," he said in a Facebook post.
Mr Lam said that he shared with attendees of the workshop Singapore's approach to combatting the coronavirus outbreak, and his thoughts on what countries need to do should there be a global pandemic.
"In such a scenario, every country imposing travel restrictions on everyone else and shutting itself out is a non-option that will hurt all of us," said Mr Lam.
While there will be pressure for countries to impose travel restriction, particularly as fears grow along with the number of COVID-19 infections around the world, stakeholders need to work together to avoid it, said Mr Lam.
"Health and civil aviation authorities, airports and airlines need to work together to avoid this outcome, by putting in place necessary measures to mitigate the spread and allow life to go on. And they need to start laying the groundwork now," he added.
Airlines across the world are rushing to cut flights and costs, and warning of a hit to earnings, as a new virus that started in China spreads, raising fears of a pandemic that could plunge the global economy into recession.
In a sign of the difficulties this is creating for airlines, a Turkish Airlines jet in Singapore was flown back to Istanbul without any passengers on board on Thursday after a passenger who had arrived on the same plane on Tuesday tested positive for the virus.
IATA projected the hit to passenger airlines in lost revenue from the crisis could be anywhere between US$63 billion and US$113 billion this year, depending on the virus's progression. On Feb 20, it had forecast a hit of US$29 billion.
Global airline industry revenues totalled US$838 billion in 2019, according to IATA data.
The COVID-19 virus has killed more than 3,000 people and infected tens of thousands more, mostly in China. But the disease has now spread to more than 60 other countries, leading to multiple travel and other restrictions.
Among the latest events to be cancelled is the world air traffic management congress in Madrid, which had been scheduled for Mar 10-12.
The failure of British regional airline Flybe comes less than two months after a rescue deal for the company was agreed by its owners and the UK government.
Despite its commitment to improving regional transport links, the British government backed away from that deal due to the scale of the hit to demand from the virus outbreak.
The failure of the airline, which has long struggled with losses, not only puts around 2,400 jobs at risk but could also see some regional UK airports struggle.
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Its collapse came a day after Ryanair chief executive Michael O'Leary predicted that the coronavirus crisis would lead to bankruptcies.
"It's inevitable in the next couple of weeks we'll see more failures," O'Leary told Reuters.
"Where you have a massive short-term decline in bookings you have a massive short-term decline in cash flow," he said on the sidelines of an industry event in Brussels on Tuesday.
Norwegian Air, a pioneer of low-cost transatlantic travel, has also been struggling for years due to cut-throat competition and heavy debts built up during rapid expansion.
The company, which has repeatedly raised cash from shareholders to stay in business, said on Thursday it was scrapping its 2020 earnings guidance, which had predicted a return to profit after three years of losses, due to the drop in travel demand and disruption caused by the virus.
It also said it would cancel 22 long-haul flights between Europe and the United States from Mar 28 to May 5, with routes from Rome to Los Angeles, Boston and New York seeing a reduced number of departures.
In addition, it will cut the number of flights between London and New York, flying twice, rather than three times, on some days.
"At this stage, it is too early to assess the full impact on our business," it said in a statement.
Willie Walsh, the outgoing CEO of British Airways parent IAG, also warned governments this week against any temptation to prop up airlines that were already struggling.
"I don't believe it's appropriate for governments to provide state aid to airlines that were not sustainable before the coronavirus," he said at the Brussels gathering.