S&P Global Ratings believes the coronavirus pandemic is likely to have an unprecedented impact on global air travel compared with previous pandemic or epidemic events, such as 2009's H1N1 virus, also known as swine flu, or SARS in 2003. Our base case for global air passengers in 2020 assumes a decline of 20-30 percent from 2019, with full recovery achieved only in 2022-2023.
This view takes into account the coronavirus's rapid spread to over 125 countries and the severity of lockdown measures to contain the coronavirus, given the risk of contagion. Various European countries have now taken extreme measures to restrict travel, while the U.S. has restricted anyone who has been in 28 European states in the prior 14-day period from entering the U.S.
In addition, economic growth is heading sharply lower against a backdrop of volatile markets and growing credit stress, leading S&P Global economists to now forecast a global recession this year, with 2020 GDP rising just 1.0-1.5 percent, consisting of roughly 3 percent growth in China but contraction of -0.5 percent to -1 percent for the eurozone and 0 to -0.5 percent for the U.S. (see "COVID-19 Macroeconomic Update: The Global Recession Is Here And Now," March 17, 2020).
The impact on each airport rating will depend on several factors, including the speed, scale, geography and duration of the crisis; measures taken by each airport to mitigate passenger declines and administrate fixed costs; potential government extraordinary support; and the financial flexibility of each airport prior to the virus outbreak, as well as their liquidity cushions. We expect the traffic impact to extend to domestic flights as local social isolation and travel restrictions come into place.
For example, in India, where airports are over capacity and traffic is concentrated in domestic flights, we don't expect a big scaling back of large capital expenditure plans, given the degree of advance of ongoing investments. As a result, already weakening credit metrics will come under further pressure.
