The International Air Transport Association (IATA) has released its financial outlook for the global air transport industry showing that airlines are expected to lose $84.3 billion in 2020 for a net profit margin of -20.1%. Revenues will fall 50% to $419 billion from $838 billion in 2019. In 2021, losses are expected to be cut to $15.8 billion as revenues rise to $598 billion.
Alexandre de Juniac, IATA’s Director General and CEO,stated: “Financially, 2020 will go down as the worst year in the history of aviation. On average, every day of this year will add $230 million to industry losses. In total that’s a loss of $84.3 billion. It means that—based on an estimate of 2.2 billion passengers this year—airlines will lose $37.54 per passenger. That’s why government financial relief was and remains crucial as airlines burn through cash.”
He added that “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. 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,”
De Juniac also revealed that Airlines will still be financially fragile in 2021, adding that “passenger revenues will be more than one-third smaller than in 2019. And airlines are expected to lose about $5 for every passenger carried”.
The cut in losses will come from re-opened borders leading to increased volumes of travelers. Strong cargo operations and comparatively low fuel prices will also give the industry a boost. Competition among airlines will no doubt be even more intense. That will translate into strong incentives for travelers to take to the skies again. The challenge for 2022 will be turning reduced losses of 2021 into the profits that airlines will need to pay off their debts from this terrible crisis.
With regard to passenger interest and confidence in air transport, De Juniac stated that “People will want to fly again, provided they have the confidence in their personal financial situation and the measures taken to keep travelers safe. There is no tried and true playbook for a recovery from COVID-19 but the ICAO Takeoff re-start plan is globally harmonized. It is important that industry and governments follow it so that travelers will have the maximum reassurance about their safety. That will be a good start.”
He also stated that, depending on how the pandemic evolves, knowledge of the virus deepens, or science improves, industry and governments will be better prepared for a globally coordinated response. That includes the potential removal of measures when it is safe. That will give airlines some breathing room to rebuild demand and repair damaged balance sheets.