Industry association the International Air Transport Association (Iata) says net airline industry losses are likely to reach $47.7-billion for this year.
This is an improvement on the estimated net industry loss of $126.4-billion in 2020.
“This crisis is longer and deeper than anyone could have expected. Losses will be reduced from 2020, but the pain of the crisis increases.
“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 [expected to] travel by air in 2021, airlines will burn through a further $81-billion in cash,” says Iata director-general Willie Walsh.
The outlook points to the start of industry recovery in the latter part of this year, the industry body points out.
In the face of the ongoing crisis, Iata has called for a number of immediate priorities.
Firstly, it 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 reopening 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. In the meantime, a significant portion of the $3.5-trillion in gross domestic product 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,” says Walsh.
Secondly, it calls for employment support.
Iata says industry losses of this scale imply a cash burn of $81-billion this year on top of the $149-billion in 2020.
Government financial relief measures and capital markets have been filling this hole in airline balance sheets, preventing widespread bankruptcies. The industry will recover but more government relief measures, particularly in the form of employment support programmes, will be needed this year, the association emphasises.
“Owing to government relief measures, cost-cutting and success in accessing capital markets, some airlines appear able to ride out the storm. Others are less well-cushioned and may need to raise more cash from banks or capital markets. This will add to the industry’s debt burden, which has ballooned by $220-billion to $651-billion.
“There is a definite role for governments in providing relief measures that ensure critical employees and skills are retained to successfully restart and rebuild the industry,” says Walsh.
Iata also calls for cost containment or reductions.
It notes that the entire industry will come out of the crisis financially weakened and, therefore, cost containment and reductions, wherever possible, will be key to restoring financial health.
“Containing and reducing costs will be top of mind for airlines. Governments and partners must have the same mentality. And that must be reflected in items big and small. There can be no tolerance for monopoly infrastructure suppliers gouging their customers to recoup losses through higher charges.
“Equally, we demand an end to the extortionate costs for Covid-19 testing with governments taking their cut on top of that with taxes. Everyone must be aligned in understanding that increased travel costs will mean a slower economic recovery. Cost reduction efforts on all sides are needed,” says Walsh.
Meanwhile, Iata says travel restrictions, including quarantines, have killed demand.
It estimates that travel will recover to 43% of 2019 levels over this year. While that is a 26% improvement on 2020, it is far from a recovery, it says.
Domestic markets will improve faster than international travel. Overall passenger numbers are expected to reach 2.4-billion this year. That is an improvement on the nearly 1.8-billion who travelled in 2020, but well below the 2019 peak of 4.5-billion.
In terms of cargo, Iata said this segment has outperformed the passenger business throughout the crisis. That trend is expected to continue throughout this year, with cargo volumes to reach about 63.1-million tonnes, which is nearly at the pre-crisis peak of 63.5-million tonnes which occurred in 2018.
Iata says airlines have not been able to cut costs as fast as revenues have fallen.
Moreover, capacity is likely to return at a slower pace than demand, it adds.
Regionally, Iata states that African carriers will see slow vaccination rates limit international travel.
However, net losses for the continent are expected to fall this year, from -32% of revenues in 2020 to -24%.