CORONAVIRUS COULD REDUCE GLOBAL PASSENGER TRAFFIC BY 30% IN 2020
The bleak news continues today with S&P Global Ratings agency stating that the coronavirus pandemic is likely to have an unprecedented impact on global air travel, forecasting a 20% to 30% decline in global passengers in 2020.
It also warns that recovering from the pandemic seems to be a more challenging prospect than in the case of previous viruses.
“Various European countries have now taken extreme measures to restrict travel,” said Julyana Yokota, S&P’s director of infrastructure ratings.
“In addition, economic growth is heading sharply lower against a backdrop of volatile markets and growing credit stress.”
It adds that airports credit ratings – although more resilient than those of airlines – are likely to come under significant pressure and predicts that 2022-2023 is the most probable timeframe for a full recovery.
Regarding airport ratings coming under pressure, the report says: “Even though airports’ credit quality tends to be significantly more resilient than airlines’, we do foresee rating pressure.
“This is because of the extreme drop in passenger numbers – assumed to be at least 20% in 2020 (from 2019) but potentially averaging 70% over a three-month peak period and recovering less steeply than seen in past events, given the difficulty of containing this virus.
“While airports have diverse revenue streams, the plunge in passengers will undoubtedly affect non-aeronautical commercial revenue or may lead to some negotiated support of retailers from the airport operators.
“While many airports’ contracts with their tenants have minimum revenue guarantees that normally would provide some protections, in the current situation, airports are likely to take into consideration the difficulties endured by their customers affected by the outbreak and adapt the payment conditions applicable to them, and to co-operate with airlines and retail partners by relieving them of some of their contractual obligations to help them survive.
“For example, Aeroports de Paris is suspending parking fees for aircraft immobilised on its platforms because of the crisis. The rental and leasing expenses for premises located in the closed terminals will not be due for the closure period of these terminals.
“There are additional downside risks related to the uncertainty of when the pandemic will peak. The impact on the economy and air travel could certainly persist well beyond second-quarter 2020.
“According to IATA, previous disease outbreaks have peaked after one to three months and recovered to pre-outbreak levels in six to seven months.
“Because the new coronavirus is more difficult to contain, given the slower development of symptoms and the risk of contagion, we expect a longer path to recovery, as shown below.”