The International Air Transport Association (IATA) expects airlines net losses of $ 47.7 billion in 2021.
Overall, the pandemic has had a dramatic effect on the world’s air transport services sector.
For now, the IATA projection is an improvement over the industry’s estimated net loss of $ 126.4 billion in 2020.
Furthermore, given that around 35% of world trade (in value) is carried out by air, the collapse of passenger flights has had a significant impact on air cargo capacity.
Prospects point to the start of the industry recovery in the latter part of 2021.
“Government-imposed travel restrictions continue to dampen strong underlying demand for international travel. Although an estimated 2.4 billion people will travel by air in 2021, airlines will spend another $ 81 billion in cash, ”said Willie Walsh, IATA CEO.
Faced with the current crisis, IATA calls for:
Plans for a reboot in preparation for a recovery
IATA continues to urge governments to have plans so that no time is wasted in restarting the sector when the epidemiological situation allows a reopening of the borders.
Most governments have yet to provide clear indications of the benchmarks they will use to safely return people’s freedom of travel.
Meanwhile, a significant portion of the 3.5 trillion GDP and 88 million jobs supported by aviation are at risk.
“The effective restart of aviation will invigorate the travel and tourism sectors and the economy in general. With the virus becoming endemic, learning to live, work and travel safely with it is critical. That means governments must focus on risk management to protect livelihoods and lives, ”Walsh said.
In addition to $ 149 billion in 2020, industry losses of this scale imply a cash burn of $ 81 billion in 2021.
For now, financial aid measures from the government and capital markets have been filling this gap in airline balance sheets, preventing widespread bankruptcies.
For IATA, the industry will rebound, but this year more government assistance measures will be needed, particularly in the form of employment support programs.
Due to government relief measures, cost cutting, and successful access to capital markets, some airlines appear capable of weathering the storm.
Others are less cushioned and may need to get more cash from banks or capital markets.
“This will add to the industry’s debt burden, which has skyrocketed from $ 220 billion to $ 651 billion. There is a defined role for governments in providing relief measures that ensure that employees and critical skills are retained to successfully restart and rebuild the industry, ”Walsh commented.
The entire industry will emerge from the crisis financially weakened. Containment and cost reductions, wherever possible, will be key to restoring financial health.
“We demand an end to the exorbitant costs of Covid-19 testing and governments are adding to that with taxes. Everyone needs to be aligned to understand that rising travel costs will mean a slower economic recovery. Cost reduction efforts are needed on all sides, ”Walsh said.