COVID-19

Initial impact* assessment

of the novel Coronavirus

IATA Economics
20th February 2020

1 * This is a preliminary scenario. It is likely to change as the situation evolves and evidence builds.
Economics
 Previous disease outbreaks have peaked after 1-3 months
and recovered pre-outbreak levels in 6-7 months
Impact of past disease outbreaks on aviation
SARS (2003) Avian Flu (2005) Avian Flu (2013)
120 North American Asia Pacific Airlines RPKs
RPKs to, from and within
110 Airlines RPKs South-East Asia
Index (crisis month=100)

100
90 MERS Flu (2015)
80 RPKs to, from and within South
SARS (2003) Korea
70 Asia Pacific
60 Airlines
50 RPKs
40 SARS (2003)
30 China Domestic Market
20 RPKs

10
-3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12
Months before and after the start of the crisis

Source: IATA Economics using data from IATA Statistics Economics

 SARS caused the only annual decline in Asia-Pacific traffic
in almost two decades
Asia-Pacific Airlines’ Passenger Kilometers flown (RPKs)

3,500
Billions of passenger kilometers flown

3,000

2,500
2003 SARS
2,000 Outbreak: 20-year trend:
RPKs declined CAGR 7.4%
by 5.1%
1,500

1,000

500

0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Source: IATA Economics using data from IATA Statistics Economics

 SARS experience may underestimate today’s impact
because China’s economic size is now much greater
China’s Contribution to World Economy

2002 2018
39%

18%
16%
13%
10%

4% 5% 5%

Share in World Economy Share in Trade (Exports + Imports) Share in Manufacturing Share in Travel& Tourism

Source: IATA Economics using data from the IMF WEO, UN, WTTC Economics
 Since SARS China and other Asia Pacific airlines’ share in
worldwide RPKs have risen from 27% to 35%
Regional Share of RPKs (% of worldwide RPKs)
Latin America 5% 5%
Middle-Eastern & Africa 6%
11%

Europe 26%
27%

North America 36% 22%

Asia-Pacific excluding 25%

China Domestic 24%

China Domestic 10%

3%
2002 2019
Source: IATA Economics using data from IATA Statistics Economics
 China’s domestic market has become twice as important
for total Asia Pacific airlines’ RPKs
Asia-Pacific airlines RPKs Asia-Pacific airlines RPKs
2002 2019

Source: IATA Economics using data from IATA Statistics Economics

 Asia-Pacific airlines are most exposed to Chinese markets,
but others impacted if COVID-19 effects widen
% of base revenues from International Asia Pacific (excl.
100% China)
90% % of base revenues from International China
% of total base revenues, YE Nov 2019

80%
% of base revenues from Domestic China
70%
9%
60% 79%

50% 3%
40%

30% 59%
46%
20%
2% 5%
10% 21% 1% 0.2%
10% 7% 1%
6%
0%
China Asia Pacific Middle East Europe Africa North America Latin America
excluding China
Airlines' region of registration
Base revenues: excluding revenues from ancillaries, baggage fees, etc.

Source: IATA Economics using Jan-Nov 2019 data from DDS Economics
 January data from China indicates a sharper decline than
SARS outbreak in the first month after the outbreak
Daily China Passenger Numbers (Domestic+International)

Start of the
150 Chinese New Year
Holiday
140
Index (January 1st 2019 = 100)

130
120
110
100
90 2018 2019 2020
80
Jan 31st 2020: Daily
70 passenger numbers down
~40% vs Feb11th 2019
60
-15 -14 -13 -12 -11 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7
Days before and after the start of the Chinese New Year Holiday

Source: IATA Economics using data from DDS Economics

 February data shows further decline with domestic +
international China passenger numbers down around 60%
Year-on Year Change in Passenger Numbers
Within China China International

Jan 23-Feb 8 Feb 8- Feb 15 Feb 16- Feb 22

0%
-10%
-20%
-30%
-40%
-50%
-60%
-70%
-80%
This data shows tickets sold for travel on these dates minus refunds and
exchanges. It is for scheduled travel and so will not include charter services.

Source: IATA using data from DDS Economics

 If COVID-19 impact has a SARS-shaped profile this implies
a 13% loss of RPKs in 2020 for Asia-Pacific airlines
Asia Pacific Airlines' RPKs
300
Billions RPKs per month (Seasonally

250
13% loss of
200 annual RPKs COVID-19 ‘SARS-shaped’ scenario
compared to Estimated with existing data to month 2 (February),
adjusted)

150 pre-COVID-19 then scenario follows broad pattern of SARS

trend Note: this is one of several possible scenarios. At
100 this stage we cannot predict the exact path

50 9% loss of SARS 2003

annual RPKs
0
-3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12

Months before and after crisis

Source: IATA Economics using data from IATA Statistics Economics

COVID-19 ‘SARS-shaped’ scenario implies a 4.7%
loss to industry-wide RPKs in 2020 and a $29bn
loss of passenger revenues
Estimated Impact on 2020 RPKs
Estimated Impact on 2020
Region of airline registration (% of December forecast for
Passenger revenue (billion US$)
2020)
US$ 12.8 bn comes
Asia Pacific -13.0% -27.8 from China domestic
market.

North America -0.4% -0.7

Europe -0.4% -0.6
Middle East -0.2% -0.1
Africa -0.4% -0.04
Latin America -0.1% -0.03
Industry -4.7% -29.3
Scenario notes: Regional impacts outside Asia Pacific Region are based only on the direct
exposure to Chinese markets. No additional or second round weakness of Asia Pacific markets are
included. SARS had wider impacts but so far COVID 19 has 99% of its cases in mainland China.
Revenue impacts are estimated based on the 2020 RPK impact assuming no change in yields.
Economics
2020 RPK forecasts before and after COVID-19
(assumes ‘SARS-shaped’ scenario and no other
changes)
Region of airline December 2019 COVID-19 ‘SARS- Implied COVID-19
registration forecast shaped’ scenario impact ‘SARS-shaped’ scenario
Asia Pacific 4.8% -13.0% -8.2%

North America 3.8% -0.4% 3.4%

Europe 3.8% -0.4% 3.4%

Middle East 2.5% -0.2% 2.3%

Africa 3.8% -0.4% 3.4%

Latin America 4.3% -0.1% 4.2%

Industry 4.1% -4.7% -0.6%

Scenario notes: The December 2019 forecast can be found at Economic performance report. The
final column is indicative, showing how the forecasts RPK growth numbers for 2020 could be
reduced if this particular COVID-19 scenario came about. It takes no account of any other changes,
such as lower fuel prices, policy actions or knock-on and second-round effects. The scenario
impacts are subtracted from the December forecast for simplicity, though this is not exact. Economics
 Lower fuel prices may provide some offset
Brent crude oil prices and futures curves,US$ per barrel
90
With no hedging or change in the crack spread, a 6 $/b lower fuel
85 price could save $13 billion off the industry’s 2020 fuel bill. Our
December forecasts were based on an average 63 $/b oil price.
80 However, many airlines will have hedged 2020 fuel so this benefit
– if no further change – could be delayed for some.
75
US$ per barrel

70
Early-Jan futures curve
65 (2020 average 63 $/b)

60
Mid-Feb futures curve
55 (2020 average 57 $/b)
50

45

40
2017 2018 2019 2020 2021

Source: IATA Economics using data from Refinitiv Datastream Economics

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