Airlines headed to a US$84bn loss in 2020 due to corona virus pandemic

GLOBAL – Airlines are set to lose US$84 billion as the coronavirus pandemic reduces revenue by half to mark the worst year in the sector’s history, the International Air Transport Association (IATA) forecast.   

With most of the world’s airliners currently parked, IATA said revenue would likely fall to US$419 billion from US$838 billion last year. The average loss amounts to almost US$38 per passenger flown.   

“Every day of this year will add US$230 million to industry losses. Airlines will still be financially fragile in 2021,” IATA Director General Alexandre de Juniac, predicting even more intense competition.   

“That will translate into strong incentives for travellers to take to the skies again.”   

In 2021, IATA forecast losses at US$15.8 billion to take the two-year total to about US$100 billion as traffic struggles to recover and airlines slash fares to win business. IATA forecast a rise in 2021 revenue to US$598 billion.   

Airlines are counting the cost of weeks of lost business, a debt pile swollen by bailouts and a diminished demand outlook. Passenger numbers are seen falling to 2.25 billion this year before rising to 3.38 billion in 2021, still more than 25% below 2019 levels.   

Yields, a proxy for fares, are seen falling 18% this year, contributing to a US$241 billion decline in passenger revenue.   

Cargo, a relatively small share of the overall business, brought some relief as mass plane groundings drove price increases expected to top 30%, IATA said, helping revenue to a near-record US$111 billion.   

Even in markets where COVID-19 infection rates have fallen sharply, airlines still face a patchwork of travel restrictions and wary consumers.   

A 14-day quarantine for arriving passengers introduced by Britain this week has prompted an angry response and legal threats from the travel industry amid reports that it may be loosened in favour of “air corridors” to some destinations.   

“Provided there is not a second and more damaging wave of COVID-19, the worst of the collapse in traffic is likely behind us. A key to the recovery is universal implementation of the re-start measures agreed through the International Civil Aviation Organization (ICAO) to keep passengers and crew safe,” said Junaic.  

“And, with the help of effective contact tracing, these measures should give governments the confidence to open borders without quarantine measures. That’s an important part of the economic recovery because about 10% of the world’s GDP is from tourism and much of that depends on air travel. Getting people safely flying again will be a powerful economic boost.”  

All regions will post losses in 2020. The crisis has taken on a similar dimension in all parts of the world with capacity cuts lagging about 10-15 percentage points or more behind the over-50% fall in demand.  

North America’s is expected to have a loss of US$23.1 billion. Its large domestic markets and financial support to US carriers under the CARES Act are expected to play a key role in the recovery.   

Europe is expected to have a loss of US$21.5 billion The progressive opening of intra-European travel has the potential to boost the recovery, provided onerous quarantine measures are avoided.   

Asia-Pacific is expected have US$29 billion and also to post the largest absolute losses in 2020 since it was the first region to endure the brunt of the COVID-19 crisis.  

Middle East is expected to have a US$4.8 billion loss. Lower oil prices will add extra pressure to a difficult economic situation within the region. The recovery for the region’s super connectors could be delayed, with the expected phasing of the re-start with domestic and regional followed by long-haul international routes. 

Latin America  is estimated to have a US$4 billion loss. The region’s governments have implemented some of the most draconian measures in terms of border closures which could both delay and slow down the recovery. 

Africa is estimated to have a US$2 billion loss. Border closures have all but stopped flights. International donors will be needed to supplement the limited means for the region’s governments to provide relief packages. 

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