The collapse in passenger in China as a result of coronavirus is predictable but the knock-on negative impact for the global market may mean demand does not return to normal until Q2 2021 at the earliest, says Helane Becker, managing director of analysts Cowen.
IATA’s 20-year air passenger forecast currently predicts that China would overtake the US as the largest market for air travel by 2024, but Becker said that Cowen predicts the coronavirus outbreak to cut a year’s worth of expected Chinese passenger growth. She was also pessimistic over IATA’s view on the global revenue impact of the virus and the likelihood of the aviation sector returning to normal.
“If people are afraid to travel outside of their own borders, the $30 billion impact to revenue that IATA cited last Thursday will be low. We believe that a complete recovery in traffic by the fourth quarter could be optimistic, and that it may take until 2Q2021 at the earliest for traffic to return to normal.”
Becker told Airline Economics that while United Airlines recent report that demand for China services was 100% down was predictable, given that the carrier has stopped all services to country, that fact that it was also citing a 75% plunge in demand for travel to other Asian markets was “more concerning”.
It’s not just United which is reporting falling broader Asia demand, with Air France also citing weaker numbers for non-China Asia travel in its 2019 results last week. While this can be partly explained by business travel being postponed to affected areas in Asia, Cowen was also seeing this trend emerge in areas that have so far not been impacted by the outbreak.
Becker cited the cancellation of a business event in San Francisco this week, due to companies pulling out – even though no cases have yet to be reported in the US. Likewise, she points to the Mobile World Conference which was due to take place in Barcelona this week was also cut, a decision that was taken before the outbreak in Italy was reported.
International travel maybe feeling the hit, but airlines are still reporting strong domestic demand, but Becker says that Cowen’s house view is that leisure travellers planning spring breaks will stick close to home. The good news for the aviation sector is that the underlying demand for air travel remained strong and that once the coronavirus issue was over airlines could receive a major boost at that point.
“We definitely think if people stay home, [the result is] there will be pent-up demand,” says Becker.