On March 5 — the same day British regional airline Flybe shut down — the International Air Transport Association (IATA) called on governments to provide tax relief for airlines to ease the financial fallout from the coronavirus.
According to a March 5 IATA release, the association's most recent analysis shows that the global passenger air transport sector could lose $63 billion to $113 billion in revenue in 2020, depending on whether the virus can be contained or continues to spread.
IATA's previous analysis, issued February 20, estimated the revenue loss at $29.3 billion, "based on a scenario that would see the impact of COVID-19 largely confined to markets associated with China." The spread of the virus, coupled with a decline in flight bookings, warranted the update, the group said.
The analysis took into consideration two scenarios: one in which the virus is contained in markets that have already reported more than 100 cases, and the other in which at least 10 cases have been reported. China and markets associated with it are set to lose the most, with European countries like Italy, France, and Germany closely following suit, the association said.
Although the release acknowledges the low price of oil, IATA said the price drop is not enough to balance the virus's financial impact on airlines. Risk management strategies will help, but more action is needed, said Alexandre de Juniac, IATA’s director general and CEO. “The turn of events as a result of COVID-19 is almost without precedent. In little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse," he said. “Many airlines are cutting capacity and taking emergency measures to reduce costs. Governments must take note. . . . As governments look to stimulus measures, the airline industry will need consideration for relief on taxes, charges, and slot allocation. These are extraordinary times.”
Many observers attribute Flybe's collapse to the virus. The U.K. government stepped in to assist the company, once considered the largest independent regional airline in Europe, by reviewing the air passenger duty it still owed, but that wasn't enough to save the company. The government’s intervention angered other U.K. airlines, with The Financial Times reporting on January 17 that IAG, owner of British Airways, had “filed a complaint to the EU over state aid concerns.” Ryanair has announced it will help customers who were left stranded by Flybe's collapse by offering flights starting at £19.99.
Italy Offers Tax Relief in Wake of Virus
Italian Minister of Economy and Finance Roberto Gualtieri told la Repubblica newspaper that the government is planning a €3.6 billion stimulus package — equal to 0.2 percent of GDP — in response to the coronavirus. According to a March 1 government release, the stimulus package includes tax cuts and a tax credit for companies that have suffered a drop of 25 percent in revenues. It is expected to take effect in the next few days.
The government has suspended tax payments due from February 21 to March 31 for individuals and businesses in 11 municipalities affected by the virus, according to a February 24 release.