Facebook
Twitter
LinkedIn
Instagram
Youtube

How is coronavirus impacting the aviation industry?

Team Veye | 04 Aug 2020

How is coronavirus impacting the aviation industry?

Before the outbreak of the pandemic, the forecasted number of air passengers worldwide in 2020 was approximately 4.72 billion. The revenue forecast from air passenger traffic in 2020 before the coronavirus was 581billion USD.

When the virus started spreading in January this year, the first step most of the countries took was to close the borders and limit the domestic travel as an immediate response to novel coronavirus outbreak.

Even where flights were not cancelled, a significant reduction in passengers led to either flight getting cancelled or planes flying with much fewer travellers. This in turn resulted in massively reduced revenues. 

It is not only the passenger airline segment that got affected during this time. The global aviation industry is primarily segmented into cargo airlines and airport managing companies apart from passenger airlines.

The impact of the pandemic has gradually deepened to the entire air transport industry. It is now reaching aircraft manufacturing companies and catering & other service providing companies. One of the earliest examples was when Boeing canceled a 4.2 billion U.S. dollar deal to buy the commercial aircraft division of Embraer. 

As a major provider of airplane engines, Rolls-Royce also announced it will abandon its profit targets, delivery targets and cash reserve targets for this year and stop shareholder dividends. The gravity of the situation is realised when it is noticed that it was Rolls-Royce's first cancellation of shareholder dividends since it was privatized in 1987.

Restored passenger confidence and improved economic conditions can certainly impact both passenger and cargo sectors. Only then Airport revenue generation can take place. As the cost of operating airport infrastructure remains the same because they have very limited ways of reducing costs even when there is no activity.

There has been too much uncertainty about the crisis and industry is hopeful that the situation could get better in 2021, but still remains uncertain about the capacity getting fully restored.

Disclaimer

Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing reports. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.