China Eastern, B-8977 Airbus A321

On Apr.29th, IATA announced “Air Passenger Monthly Analysis” for March. According to that, the demand decreased to 52.9% compared to 2019.3. In the fifth “Update Impact Assessment” published on Apr.14th, the forecast for whole year is a 55.5% down, similar to the data observed in March. A complete look of six IATA assessments on Pandemic gives following trends, IATA’s projection was getting worse in the first four reports, the estimated impact soars from 4% right up to 71%, (in the third report, a 71% decrease in RPK for second quarter)

The fifth and sixth report give a more positive projection, mostly quantitively. The number in fifth report is 55% YoY decrease, and the sixth report focused on the gradual recovery of Chinese domestic market and the estimation of other market. Consider as a whole, IATA’s estimation of the impact is getting close and rational. According to the Prospect Theory, the severity may be over estimated in the short run, but as time goes by, an relatively accurate expectation is seen.


In this article, IATA uses ASK and RPK to measure capacity. To make this analysis clearer, here is the introduction of these two terms. Available Seat Kilometer, or ASK, is the product of sell-able seats each on flight and distance of flight, multiplied respectively. Revenue Passenger Kilometer, or RPK, is the product or sold seats and the distance of flights. ASK measures the capacity airlines have, while RPK shows how much Seat Kilometer is making revenue. Mathematically speaking, the higher RPK/ASK, the more seats are occupied, the higher efficiency airlines got.

According to the assessment, all market’s RPK and ASK falls drastically, aligned to previous projection. The decrease mainly accredited to the Pandemic, while the recession also affects that. Asian Pacific experience the largest decline, mainly due to the time Pandemic begins to spread. Both ASK and RPK toboggans more than 50%, one influential factor should be foreign airline’s cancellation of Chinese location.


As there’s a positive relationship between ASK drop and severity of Pandemic, a sequential increase is likely to occur in April. As a key market, Asian Pacific’s recovery will pull the average up. North America has the highest RPK/ASK, meaning the largest decline in airlines efficiency. The Pandemic was just beginning its wide spread in March, which, accompanied by cancelled international flight, panicked the customers.

Moreover, travel restrictions lower the capacity. In the fourth analysis, IATA shows that 98% countries and regions in the world implemented different levels of restrictions, which decrease the demand and confidence drastically, with a 43.5% ASK decrease in international market.


Speaking of domestic market, Chinese market experienced a 65.5% YoY decrease, American and Japanese market has a higher RPK decrease / ASK decrease. Although the jet fuel price decrease notably, the increase in crew cost neutralize the effect. Although customer was panicked, airlines still give relatively high capacity. Chinese market was getting its recovery from the pandemic, with a higher executed rate.

The Pattern is clear

In the final part of this report, De Juniac stress the importance of getting prepared for further decrease, as previous press release has said, but still with a heart and determination of walking is through. Whereas Warren Buffet thought differently. In May.3rd, he sold all his stock of four Airlines in America. To analyze from profitability angle rather than responsibility angle, this act shows Buffet’s little confidence of airlines’ business model in the future. Another reason for this sudden sell might be Buffet Company’s liquidity crisis. The Pandemic will drag down the confidence more than it lasts, which will directly associated with RPK recovery, as high price level cabin with fewer demand. This sale also avoid the risk of company reconstruct, in which situation no one knows what will happen to the stock rights.

This sale is of great economics loss. Buffet do claims that BRK “focuses on future revenue and disregard short time fluctuation.” From this context, this sale cast doubt on the profitability clearly.

Admittedly, the Pandemic will lead some airlines to bankruptcy, as IATA once project: “On their own, few airlines can maintain more than two months.” However, governments give massive support both fiscally and monetarily. Stock price will recover for sure when the Pandemic has passed.

Be hopeful, the recovery is near!

In short, through March, IATA’s statistics shows how Pandemic impacts aviation industry in a severe way, with a progression on estimation of loss. Warren Buffet’s low sell shows his negative attitude towards aviation industry. Some analyst even forecast bankruptcy of some major airlines. But as far as the writer concerned, most airlines can go through this crisis with the help of government, and a rebound with fast growth can be seen as the confidence back to normal.

IATA Economics Team. (2020.Apr.29 ). Air passenger demand & capacity evaporate amid COVID-19. IATA Economics.—mar-2020/
Pearce, Brain. (2020.Apr.21st)  Assessing prospects for domestic markets. IATA Economics.

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