COVID-19: European airline RPKs worst hit. Survival gauged in months
The Purchasing Managers' Index, published by IHS Markit and a widely used indicator of business confidence, has hit record lows in Mar-2020. The indices being historically a reliable lead indicator of air traffic growth, their collapse, both for the Eurozone and the UK, is yet another sign of the massive impact of COVID-19 on European aviation.
Meanwhile, IATA has more than doubled its estimate of the negative impact of coronavirus on world airline passenger revenue in 2020 – from USD113 billion to USD252 billion (30% of previously forecast total revenue).
This impact is expected to be felt most by airlines in Asia Pacific and Europe, while Europe is likely to suffer the greatest percentage RPK fall. Airlines eliminate variable costs by grounding aircraft, and they are doing what they can to reduce labour expenses – the biggest fixed cost.
Nevertheless, a loss for the world airline industry in 2020 now looks inevitable.
The typical European airline's liquidity was two months of revenue at the outset (similar to those in other regions).
There are some stronger airlines, but even after mitigating action on costs, survival for most in a zero demand environment is a matter of months.
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