Coronavirus hit to airlines can top $100b, UK carrier Flybe collapses

Airlines across the globe are rushing to cut flights and costs and warning of hit to earnings

LONDON/SINGAPORE: The coronavirus epidemic could rob passenger airlines of up to $113 billion in revenue this year, an industry body warned on Thursday, more than three times the projection it made just two weeks ago as the virus continues to spread around the world.

The warning from the International Air Transport Association (IATA) came as British regional carrier Flybe became the first big casualty of the slump in travel demand due to the crisis.

Norwegian Air also scrapped its profit forecast for 2020, while US budget carrier Southwest  predicted a $200-300 million hit to its first-quarter operating revenues.

"There are lots of airlines that have got relatively narrow profit margins and lots of debt, and a cash flow shock like this could certainly send some into a very difficult situation," IATA Chief Economist Brian Pearce told a media event in Singapore.

Airlines across the globe are rushing to cut flights and costs, and warning of a hit to earnings, as a new virus that started in China spreads, raising fears of a pandemic that could plunge the global economy into recession.

In a sign of the difficulties this is creating for airlines, a Turkish Airlines jet was flown back to Istanbul without any passengers on board on Thursday on orders from Singapore after a passenger who had arrived on the same plane on Tuesday tested positive for the virus.

IATA projected the hit to passenger airlines in lost revenue from the crisis could be anywhere between $63 billion and $113 billion this year, depending on the virus's progression. On Feb 20, it had forecast a hit of $29 billion.

The latest estimates equate to a drop of between 11% and 19% compared with its 2020 industry revenue forecast in December.

IATA said its lower forecast was based on the virus being contained in current markets with over 100 cases as of March 2, while the higher estimate was based on a broader epidemic. Both scenarios assume there will be a recovery by late summer.

The COVID-19 virus has killed more than 3,000 people and infected tens of thousands more, mostly in China. But it has now spread to more than 60 other countries, leading to travel and other restrictions.

South Korea, Italy and Iran have been particularly badly affected. Germany, Japan, France, Spain, the United States, Singapore and Hong Kong have all reported more than 100 cases.

Among the latest events to be cancelled is the world air traffic management congress in Madrid, which had been scheduled for March 10-12.

The failure of British regional airline Flybe comes less than two months after a rescue deal for the company was agreed by its owners and the UK government.

Despite its commitment to improving regional transport links, the British government backed away from that deal due to the scale of the hit to demand from the virus outbreak.