Coronavirus pandemic: All stories
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
Air China planes are seen parked on the tarmac at Beijing Capital Airport. China said last week that it would drastically cut its international flight routes and bar entry to returning foreigners based in the country to stem the spread of Covid-19. Photo: AFP

US$2 trillion loss estimated for aviation-related industries worldwide from coronavirus pandemic, think tank says

  • The pandemic’s impact on the wider global aviation industry will be more than 10 times that of airline losses of US$200 billion, founder and president of Institute for Aviation Research says
  • Airports in Asia-Pacific will see a loss of US$23.9 billion this year as 1.5 billion fewer passengers travel through region’s hubs, Airports Council International says

The losses for the wider global aviation industry, excluding airlines, from the coronavirus pandemic could exceed US$2 trillion this year, with millions of jobs at risk in Asia-Pacific alone, according to Zheng Lei, founder and president of the Institute for Aviation Research, an independent think tank.

“Airlines are the key to the whole supply chain, if they become problematic, other parts of the supply chain will be affected,” said Lei, who is also the head of aviation department at Swinburne University of Technology in Australia.

“As to impact on the global aviation sector, it has already surpassed US$200 billion. This is only for airlines, not including [the] impact on airports, retailers inside airports and on-the-ground workers. Its bigger impact should be more than tenfold of that on other sectors in the economy, such as to tourism, and shocks to export and import trade.”

According to recent estimates by the International Air Transport Association (IATA), passenger revenue losses for airlines in the Asia-Pacific this year are expected to reach around US$88 billion and US$252 billion globally.

Economy seats sell out for business-class fares as travellers flee a worsening pandemic

The aviation ecosystem is vast and supports many industries. It includes in-flight meal providers, ground service companies, transport, storage and maintenance providers, employing millions in duty-free shops, retail and catering, ground staff, shuttle bus drivers and security personnel in airports across the world.

The aviation sector and industries associated with it have been hit hard by the Covid-19 pandemic, which was first identified in China. The world’s second-largest economy and its outbound travellers have been a major driver of the global tourism industry. They spent US$130 billion in 2018, up 13 per cent from a year earlier, according to the China Tourism Academy. But as the disease spread rapidly to more than 200 countries worldwide, governments imposed sweeping travel restrictions, forcing airlines to ground most of their fleet.

The aviation industry supported around 30.2 million jobs and contributed US$684 billion to the gross domestic product of countries in the Asia-Pacific region in 2016, according to the most recent figures from Aviation: Benefits Beyond Borders, a Switzerland-based organisation that represents all sectors of the air transport industry.

“An airport in an area has a very obvious effect in driving the local economy,” said Diao Weimin, a professor at the government-managed Civil Aviation Management Institute of China, adding countries such as Malaysia, Singapore and Philippines, which rely on tourism revenue, are feeling the most pain in Asia.

He said Chinese airlines and other relevant industries alone employ over 1 million people, while Shen Xiaofeng, a transport analyst at Huatai Securities was more conservative, saying that the number could be just over 800,000.

The Asia-Pacific Travel Retail Association (APTRA) on Wednesday called on governments in over 45 countries across the region to support 320,000 local and frontline employees by including the duty free and travel retail industry in the same financial support packages as airlines, airports and maritime industries.

“The dynamics of duty free and travel retailing are intrinsically linked to the aviation and maritime industries, and their viability is entirely dependent on the return in passenger traffic,” said Grant Fleming, president of APTRA.

Separately, Airports Council International, which represents the interests of airports in Asia-Pacific and the Middle East, said airports in Asia-Pacific would see a loss of US$23.9 billion this year as 1.5 billion fewer passengers travel through the region’s hubs.

ACI said that as a result of the Covid-19 outbreak, airports’ revenue streams from both airlines and passengers have witnessed a sharp decline, adding that average passenger traffic had decreased by more than 80 per cent in the second week of March compared to a year earlier.

Meanwhile, Zheng Lei said that governments should take more measures to provide aid to sectors that are affected.

“When the government has limited money, it would need to make hard decisions to bail out some while leave the others for the market to decide, but aviation would be the priority in such a scenario,” he said.

Sign up now and get a 10% discount (original price US$400) off the China AI Report 2020 by SCMP Research. Learn about the AI ambitions of Alibaba, Baidu & through our in-depth case studies, and explore new applications of AI across industries. The report also includes exclusive access to webinars to interact with C-level executives from leading China AI companies (via live Q&A sessions). Offer valid until 31 May 2020.

This article appeared in the South China Morning Post print edition as: Airline woes to have US$2tr ripple effect