The potential costs to the global air travel sector caused by the coronavirus pandemic may run into the trillions, with government bailouts of airlines potentially “not being enough” to mitigate the colossal losses, Saj Ahmad, the chief analyst at London-based StrategicAero Research, said in the latest episode of the Arabian Business podcast.
According to recent forecasts from the International Air Transport Association (IATA), airlines around the world are facing losses of up to $113 billion as a result of drastic drops in demand and travel restrictions caused by the ongoing coronavirus pandemic.
IATA has said at least $200 billion will be needed to rescue the world’s airline amid the crisis.
In an episode of the recently launched Arabian Business podcast, Ahmad said he believes the total losses will be far greater than what IATA has so far forecast – meaning that government efforts to bolster the sector may prove costlier than anticipated.
Catalyst
“Assistance by various governments will help to a certain degree, but the reality is that it may not be enough,” he said. “Whatever IATA is talking about in terms of hundreds of billions of dollars, to be honest it may run into tens of trillions, because you’ve got to factor in the supply chains of hotels, leisure centres and associated supply chains with those that rely on aviation as a catalyst for their own industries.”
“It’s going to run into trillions, and I really don’t see that we’ve reached the bottom of this yet,” he added.
IATA forecasts show that airlines in the Gulf region are already bracing for a $7 billion financial hit and the loss of up to 347,000 jobs due to disruptions caused by the coronavirus.
“The critical thing to remember here is that a lot of the carriers, particularly in the GCC, have hedged their bets on O&D [origin and destination] traffic, picking up in one place, transiting through home hubs…and shipping off to Europe, North America and beyond,” he added.
“If countries are on lockdown and there’s no demand, where are these aircraft flying?” Ahmad added. “Eventually these figures IATA has put out will look very ridiculous in the grand scheme of things.”
Over the course of the podcast, Ahmad also discusses the impact the coronavirus will have on the long-running Open Skies debate, the impact on manufacturers such as Boeing and Airbus, what airlines could have done differently, and what long-term changes we may see as travelers in the future.
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