Middle East airlines risk losing 50% revenue if virus spreads

Muhammad Ali Albakri, regional vice president, Africa and the Middle East, IATA

irlines globally stand to lose $30 billion in revenue this year due to the Covid-19 coronavirus outbreak, according to the International Air Transport Association (IATA). Middle East carriers, meanwhile, have lost $100 million so far but if the virus spreads further in Asia Pacific, the revenue risks will increase from 3 per cent to 50 per cent.
Muhammad Ali Albakri, regional vice president, Africa and the Middle East, said globally there could be 4.7 per cent dip in passenger demand resulting in $29.3 billion loss in revenue - with Asia Pacific region alone hit by $27.8 billion, including $12.8 billion in Chinese domestic market.
"Airlines from China, South Korea, Japan and Singapore are among the countries which are also affected the most," Albakri told Khaleej Times.
Passenger demand in Middle East as of now is hit by 0.2 per cent, which translates to $100 million in revenue loss. However, Middle East airlines will face the heat if the virus spreads further to rest of Asia Pacific and if the slowdown in Chinese economy impacts travel demand in the region. Such a scenario will have 'significant additional revenue risk' for regional carriers. Also, passenger demand for Middle East carriers will be halved from earlier forecasted 4.6 per cent to 2.3 per cent. Around 50 per cent of Middle East airline capacity is in Asia Pacific, Albakri said.
"Middle East carriers play a major role in transporting passengers from Asia Pacific to Europe for instance and vice versa. Losses so far are about 3 per cent but if virus spreads to rest of Asia Pacific, then you are talking about further loss of 46 per cent."
Ticket sales drop, situation fluid
Drawing a comparison with 2003 outbreak of SARS virus, he said: "If the situation is similar, we could see a total global loss of $30 billion."
He pointed out that ticket sales have dropped in the Middle East and across the world.
"We are monitoring the situation and hope there is a reversal of the situation," he said, adding that the aviation industry was resilient and would bounce back from the situation, as it has done before.
On Emirates asking staff to go on leave, he said: "It's a demonstration of how hard industry is been hit. Airline's margin is so thin that such disruption will take them into red line."
Albakri said as situation remains fluid and airlines reassess their plans, governments should respond with fiscal and monetary policies. "Governments should look at potential losses of regional carriers and work with them. Support from government will help airlines go through this difficult period. Any reduction is operating cost and jet fuel prices will help airlines."
Albakri added that it's 'too early' to tell the impact on summer holiday travel. He noted the decision of airlines to stop flights to Iran and then Saudi Arabia to suspend visas for Umrah will affect the industry.
"We hope this period will not last for long. The industry isn't impacted to the extent of SARS or Ebola"
- ashwani@khaleejtimes.com