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IATA Predicts European Airline Revenue Losses of $89 Billion
The International Air Transport Association (IATA) has predicted that European airlines will see demand drop by 55 percent in 2020 compared to 2019 and potential revenue losses will total $89 billion. The association revised its loss prediction of $76 billion made last month as the impact of the novel coronavirus global pandemic on the airline industry continues to hit unprecedented levels.
There has been a 90 percent drop in regional demand in the last several weeks and IATA has cited the introduction of travel restrictions around the world limiting movement only to essential travel and repatriation of citizens to their home countries as having “a greater impact than previously expected.”
A significant number of European airlines have suspended passenger operations with two of the region’s largest carriers, easyJet and Ryanair, not expecting flights to operate until June. Resumption of flights may be dependent on the introduction of government-mandated social distancing measures onboard aircraft, a move which IATA says would severely impact those airlines who operate a low-cost model.
Alexandre de Juniac the director-general of IATA said: “Either you fly at the same price, selling the ticket at the same average price as before, and you lose enormous amounts of money so it’s impossible to fly for any airline, particularly low cost; or you increase ticket prices by at least 50% and you are able to fly with a minimum profit. So it means that if social distancing is imposed, cheap travel is over.”
In an interview with the Financial Times, Ryanair Group chief executive Michael O’Leary said that his airlines would not fly if governments imposed social distancing on aircraft which would limit the number of seats able to be sold. Mr. O’Leary disputed that leaving the middle seat free conformed to social distancing requirements and called the idea ‘idiotic.’ “We can’t make money on 66 percent load factors,” he said, “…either the government pays for the middle seat or we won’t fly.”
Mr. O’Leary was confident that passenger demand for Ryanair would return to 2019 levels by the summer of 2021 if a vaccine for the novel coronavirus is introduced. Though he did warn that staff layoffs were on the horizon, noting that: “The challenge for us and other airlines will be to minimise those job losses to 10 to 15 percent of pilots and cabin crew.”
IATA’s Regional Vice President for Europe echoed Mr. O’Leary’s concerns regarding airline redundancies and those in the wider economy which are supported by the sector. Rafael Schvartzman stated: “Every job created in the aviation industry supports another 24 jobs in the wider economy. Unfortunately, that means that when aviation jobs disappear, the impact is magnified across the economy. Our latest impact assessment shows that the number of jobs at risk has increased to 6.7 million across Europe. As airlines face an unprecedented liquidity crisis, we desperately need European government financial and regulatory support.”
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