Airlines face another bleak year as outlook worsens

Airlines across the globe are likely to lose $47.7 billion this year as the aviation sector struggles to recover from the coronavirus pandemic, according to the International Air Transport Association (Iata).

The global industry group on Wednesday said the latest forecast is worse than previous estimate of $38 billion in December due to challenges in controlling the virus variants.

“This crisis is longer and deeper than anyone could have expected. Losses will be reduced from 2020, but the pain of the crisis increases,” said Willie Walsh, director-general of Iata.

On a brighter note, the aviation body slightly raised its forecast for global air passenger traffic, saying it would reach 43 per cent of pre-pandemic levels. “It is a 26 per cent improvement on 2020, it is far from a recovery. Domestic markets will improve faster than international travel,” it said.

Domestic markets recovering

Overall passenger numbers are expected to reach 2.4 billion in 2021. That is an improvement on the nearly 1.8 billion who travelled in 2020, but well below the 2019 peak of 4.5 billion, the aviation group said. It further noted that international passenger traffic remained 86.6 per cent down on pre-crisis levels over the first two months of 2021.

“There is optimism in domestic markets where aviation’s hallmark resilience is demonstrated by rebounds in markets without internal travel restrictions. Government imposed travel restrictions, however, continue to dampen the strong underlying demand for international travel. Despite an estimated 2.4 billion people travelling by air in 2021, airlines will burn through a further $81 billion of cash,” Walsh said.

Financial performance worsening

The association said financial performance will be worse and more varied this year than “we expected in our December forecast”, because of difficulties in controlling the virus variants and slower vaccination in some regions.

“Global airlines lost more than $126 billion last year as the Covid-19 crisis prompted countries to lock down cities, close borders and ban international flights. Industry losses of this scale imply a cash burn of $81 billion in 2021 on top of $149 billion in 2020,” the association said.

North American airlines will fare better than previously thought, with losses of $5 billion instead of $11 billion, thanks to the recovery of the domestic market there, the Iata said, adding that the outlook has worsened in Europe due to a slower vaccination campaign and less easing of international travel restrictions.

“European airlines are now tipped to lose $22 billion, compared to $12 billion in the earlier forecast,” it said.

Speed up recovery plans

Iata continues to urge governments to have plans in place so that no time is lost in restarting the sector when the epidemiological situation allows for a re-opening of borders.

“Most governments have not yet provided clear indications of the benchmarks that they will use to safely give people back their travel freedom,” said Walsh.

In the meantime, he said a significant portion of the $3.5 trillion in GDP and 88 million jobs supported by aviation are at risk.

“Effectively restarting aviation will energise the travel and tourism sectors and the wider economy. With the virus becoming endemic, learning to safely live, work and travel with it is critical. That means governments must turn their focus to risk management to protect livelihoods as well as lives,” he added.

Cargo dominates

The aviation body noticed that cargo has outperformed the passenger business throughout the crisis. That trend is expected to continue throughout 2021.

“Demand for cargo is expected to grow by 13.1 per cent over 2020. This puts the cargo business in positive territory compared to pre-crisis levels (2020 saw a full-year decline of 9.1 per cent compared to 2019),” it said.

Total cargo volumes are expected to reach 63.1 million tonnes in 2021. That’s nearly at the pre-crisis peak of 63.5 million tonnes which occurred in 2018, it added.

The global aviation group said industry revenues are expected to total $458 billion. That’s just 55 per cent of the $838 billion generated in 2019 but represents 23 per cent growth on the $372 billion generated in 2020.

“Passenger revenues are expected to total $231 billion, up from $189 billion in 2020, but far below the $607 billion generated in 2019,” the Iata said.

“Cargo revenues are expected to reach $152 billion, a historic high. This is up from $128 billion in 2020 and $101 billion in 2019,” the aviation body said.

“Capacity remains constrained owing to the large-scale grounding of the passenger fleet. This removed significant belly capacity, driving up yields 40 per cent in 2020, with a further five per cent growth expected in 2021. In 2021 cargo will account for a third of industry revenues. This is significantly above cargo’s historic contribution, which ranged around 10-15 per cent of total revenues. The improvement in cargo, however, is not able to offset the dramatic decline in passenger revenues,” it added.

— muzaffarrizvi@khaleejtimes.com