KUALA LUMPUR (Feb 20): Initial assessment of the impact of the novel coronavirus (Covid-19) outbreak shows a potential 13% full-year loss of passenger demand for airlines in the Asia-Pacific region, said the International Air Transport Association (IATA) today.

This would translate into a US$27.8 billion revenue loss in 2020 for Asia-Pacific airlines — the bulk of which would be borne by airlines registered in China, with US$12.8 billion lost in the China domestic market alone.

"Considering that growth for the region’s airlines was forecast to be 4.8%, the net impact will be an 8.2% full-year contraction compared to 2019 demand levels," said the global airlines' grouping in a statement.

IATA said in the same scenario, airlines outside Asia-Pacific are forecast to bear a revenue loss of US$1.5 billion, assuming the loss of demand is limited to markets linked to China.

This would bring total global lost revenue to US$29.3 billion, which is 5% lower compared to what IATA had forecast in December 2019, and represents a 4.7% hit to global demand.

However, IATA said it is premature to estimate what this revenue loss will mean for global profitability.

"We don’t yet know exactly how the outbreak will develop and whether it will follow the same profile as SARS or not. Governments will use fiscal and monetary policy to try to offset the adverse economic impacts. Some relief may be seen in lower fuel prices for some airlines, depending on how fuel costs have been hedged," it added.

IATA is now expecting a 0.6% global contraction in passenger demand, measured by revenue passenger kilometers (RPK), for 2020 from an earlier forecast growth of 4.1% in December 2019.

"The estimated impact of the Covid-19 outbreak also assumes that the centre of the public health emergency remains in China. If it spreads more widely to Asia-Pacific markets then impact on airlines from other regions would be larger," it said.

"Airlines are making difficult decisions to cut capacity and in some cases routes. Lower fuel costs will help offset some of the lost revenue. This will be a very tough year for airlines,” said IATA director general and CEO Alexandre de Juniac.

He also pointed to the importance for governments to take leadership in shoring up their economies.

Citing the Singapore government which is allocating S$112 million to provide financial relief to airlines as an example, he said: "Airlines and governments are in this together."

"We have a public health emergency, and we must try everything to keep it from becoming an economic crisis. Relief on airport costs will help maintain vital air connectivity. Other governments should take good note and act quickly,” said de Juniac.