Deep industry losses to continue into 2021, says International Air Transport Association

New Delhi: The International Air Transport Association (IATA) on Tuesday (November 24, 2020) announced a revised outlook for airline industry performance in 2020 and 2021 and said that the deep industry losses will continue into 2021, even though performance is expected to improve over the period of the forecast.  

They said that a net loss of USD 118.5 billion is expected for 2020 which is deeper than the USD 84.3 billion forecast in June and a net loss of USD 38.7 billion is expected in 2021 which is deeper than the USD 15.8 billion forecast in June. 

"Performance factors in 2021 will show improvements on 2020; and the second half of 2021 is expected to see improvements after a difficult 2021 first half. Aggressive cost-cutting is expected to combine with increased demand during 2021 (due to the re-opening of borders with testing and/or the widespread availability of a vaccine) to see the industry turn cash-positive in the fourth quarter of 2021 which is earlier than previously forecast," said the official statement.    

IATA's Director General and CEO Alexandre de Juniac stated, "This crisis is devastating and unrelenting. Airlines have cut costs by 45.8%, but revenues are down 60.9%. The result is that airlines will lose $66 for every passenger carried this year for a total net loss of $118.5 billion. This loss will be reduced sharply by $80 billion in 2021. But the prospect of losing $38.7 billion next year is nothing to celebrate." 

He added, "We need to get borders safely re-opened without quarantine so that people will fly again. And with airlines expected to bleed cash at least until the fourth quarter of 2021 there is no time to lose."

"The history books will record 2020 as the industry's worst financial year, bar none. Airlines cut expenses by an average of a billion dollars a day over 2020 and will still rack-up unprecedented losses. Were it not for the $173 billion in financial support by governments we would have seen bankruptcies on a massive scale," added de Juniac. 

IATA that represents nearly 290 airlines comprising 82% of global air traffic said that the COVID-19 crisis challenged the industry for its very survival in 2020 and in the face of a half-trillion-dollar revenue drop (from $838 billion in 2019 to $328 billion) airlines cut costs by $365 billion (from $795 billion in 2019 to $430 billion in 2020). 

They said that the passenger numbers are expected to plummet to 1.8 billion (60.5% down on the 4.5 billion passengers in 2019). This is roughly the same number that the industry carried in 2003. 

"Passenger revenues are expected to fall to $191 billion, less than a third of the $612 billion earned in 2019. This largely driven by a 66% fall in passenger demand (measured in Revenue Passenger Kilometers/RPK). International markets were hit disproportionately hard with a 75% fall in demand. Domestic markets, largely propelled by a recovery in China and Russia, are expected to perform better and end 2020 49% below 2019 levels. 

"Further weakness is demonstrated by passenger yields which are expected to be down 8% compared to 2019 and a weak passenger load factor which is expected to be 65.5%, down from the 82.5% recorded in 2019, a level was last seen in 1993," said IATA.

According to IATA, the airline financial performance is expected to see a significant turn for the better in 2021, even if historically deep losses prevail as the expected $38.7 billion loss in 2021 will be second only to 2020 performance. 

"On the assumption that there is some opening of borders by mid-2021 (either through testing or growing availability of a vaccine), overall revenues are expected to grow to $459 billion. $131 billion improvement on 2020, but still 45% below the $838 billion achieved in 2019," they stated. 

The added that in comparison, costs are only expected to rise by $61 billion, delivering overall improved financial performance and the airlines will still lose, however, $13.78 for each passenger carried. 

They predicted that by the end of 2021 stronger revenues will improve the situation, but said that the first half of next year still looks extremely challenging. 

IATA noted that the passenger numbers are expected to grow to 2.8 billion in 2021 and that would be a billion more travelers than in 2020, but still 1.7 billion travelers short of 2019 performance.