Air traffic collapses worldwide and European airlines will lose more than 500 million passengers

The International Air Transport Association (IATA) has just updated its economic forecast for the airline industry to a lower level, in light of the continued severe restrictions that governments are placing on air traffic and the free movement of people in an attempt to curb the spread of the COVID-19 coronavirus pandemic.

As a result of the drastic limitations imposed by authorities in virtually every country in the world on air travel, airport closures and the global economic downturn, IATA estimates a sharp decline in revenue for airlines as a whole in the order of $252 billion. The study takes into account a scenario that contemplates three months of severe limitations on air travel and a subsequent slow economic recovery by the end of this year.

According to Eurocontrol, the European Organisation for the Safety of Air Navigation, which integrates the air traffic operations of 41 countries, flights over Europe on 25 March were down by 79% compared to the same day in 2019, with only 5,815 flights on that day. One example of this is that movements at Barcelona and Rome airports on the same day fell by 90 and 86 per cent respectively, compared to the same day last year.

In its previous analysis published on March 5, IATA had estimated a drop in revenue of $113 billion. But the massive restriction on air passenger travel has effectively crippled air traffic worldwide and increased airline losses, leaving the industry facing an unprecedented financial crisis.

In just two weeks, the situation has deteriorated significantly, so that if governments do not take urgent action, airlines around the world, especially those in Europe, are facing the biggest recession in history.  

In the European context, the scenario just outlined by IATA estimates that airlines on the old continent will suffer a 46% drop in passenger demand compared to 2019 and a potential loss of revenue of $76 billion. 

The airlines from Germany, Spain, France, Italy and the United Kingdom are the ones that suffer the greatest decreases in demand for seats. The ones that will suffer the greatest drops in demand and will be most affected will be the British airlines - mainly British Airways, EasyJet, Virgin Atlantic, Eastern Airways - with a drop in tickets that will reach 113.5 million, which will mean a loss of income of 21.7 billion dollars. For the time being, British Airways has reduced the number of seats available for its April and May routes by 75 percent.

One British airline in critical condition that has been dealt a mortal blow by the expansion of COVID-19 is Flybe, which has recently had to be rescued by the government of Prime Minister Boris Johnson. Flybe operated 40% of the UK's domestic flights and carried some 9 million passengers each year to 170 destinations across Europe

As the main European tourist nation, Spain is already suffering from the slowdown of travellers from other parts of the world and the isolation of the national population at home. The Ministry of Transport, Mobility and Urban Agenda has restricted flights by 70 percent despite the fact that the national economy depends largely on foreign tourists arriving by air.

This is why the airlines Iberia, Air Europa, Air Nostrum, Vueling, Volotea, Wamos Air, Plus Ultra and Binter are already seeing a very direct decline, which IATA has estimated at 93.7 million people, with a decrease in revenue of 13 billion. Iberia and Vueling have already decided to reduce their offer of seats by 75 percent between April and May, in addition to a Temporary Employment Regulation (ERTE) for 13,900 employees announced by Iberia.

In Germany, Eurowings and Lufthansa have already seen their air routes suffer a decline in demand of 84.4 million passengers, which will result in a loss of income of $15 billion. These forecasts are the reason why Lufthansa has announced the suspension of 95 percent of its operations until mid-April, which implies the cancellation of at least 23,000 flights

As far as the transalpine country is concerned, Alitalia and Air Dolomiti are seeing an increase in the number of empty seats on their planes, which will result in 67.7 million fewer passengers, with a drop in revenue of $9.5 billion. A few days ago, in view of the worsening of the airline's financial situation due to the coronavirus, Giuseppe Conte's government decided to nationalize the airline and place it under the control of the Ministry of Economy and Finance. 

In France, Air France in a relevant way and to a much lesser extent Hop and French Bee, are already seeing 65 million passengers disappear and their income decline by $ 12,000 million dollars, risking 318,000 jobs. As if all this were not enough, the major Irish low-cost airline, Ryanair, has cancelled most of its European routes.

The Association, which has been governed since September 2016 by Alexandre de Juniac - former president of Air France - is contemplating a slowdown of such magnitude that it “puts at risk” some 5.6 million jobs. According to IATA, the air transport industry is an economic engine of such importance that for each job it supports another 24 jobs in the general economy, which means generating employment for another 12.2 million people throughout Europe.

From this, the Association deduces that around 750,000 jobs are at risk in Spain, 402,000 in the United Kingdom, 400,000 in Germany, 318,000 in France and 256,000 in Italy, to which must be added the jobs at risk in the other European countries.

According to IATA, airlines need $200 billion in cash flow just to survive. Some governments have already taken a step forward, such as Finland, Italy, Norway and Sweden, “but many other countries have yet to do the same,” says Alexandre de Juniac, CEO of the 290-nation airline industry. Spain has also decided to support tourism, transport and hotel companies with 400 million euros through the Official Credit Institute (ICO), a measure that the sector considers "insufficient".

To minimize the damage to the European economy, IATA is asking governments for a combination of direct financial support, loans, loan guarantees and tax reductions. This will make it possible to maintain essential connections for repatriating citizens and transporting air cargo supplies to help mitigate COVID-19 infection.

By preventing most airlines from going bankrupt, it will be possible to ensure “that they return to operations when travel restrictions are lifted, thereby boosting European and global economies,” says Rafael Schvartzman, IATA's Vice President for Europe.

In addition to financial support, the employers are calling on national regulators to put in place a package of measures they describe as “relief”, such as expedited procedures for obtaining overflight and landing permits, exempting flight crew members from the 14-day quarantine, and eliminating or reducing overflight charges and parking fees.