The International Air Transport Association (Iata), the representative body for the global airline industry, has forecast that the sector will continue to suffer deep losses next year, although much less than the losses that will be experienced this year. The first half of next year is expected to be difficult, but things should start improving during the second half and during 2021’s fourth quarter the airline industry is predicted to become cash positive again.
“This crisis is devastating and unrelenting,” highlighted Iata director-general and CEO Alexandre de Juniac. “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. We need to get borders safely reopened 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.”
For 2020, Iata now expects the world’s airlines to record a net loss of $118.5-billion; in June, the association had predicted a total net loss of $84.3-billion. Global airline revenues will drop by more than half-a-trillion dollars (from 2019’s $838-billion to $328-billion for this year). Airlines have cut their costs drastically, by just over a third of a trillion dollars (from $795-billion last year to $430-billion this year).
“The history books will record 2020 as the industry’s worst financial year, bar none,” he pointed out. “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.”
While the performance of the sector next year will be less bad than this year, it will still be the second worst financial year in the industry’s history. And while the forecast net loss of $38.7-billion is much less than the figure for 2020, it is significantly deeper than the estimate for next year that Iata issued in June, which predicted net losses for 2021 of $15.8-billion. Assuming that either the availability of a vaccine and/or testing systems will allow a degree of border reopening by the middle of next year, Iata forecast that airline revenues would increase by $131-billion over the figure for this year, to reach $459-billion. But that would still be 45% below the 2019 figure of $838-billion.
“Cargo is performing better than the passenger business,” he noted. “It could not, however, make up for the fall in passenger revenue. But it has become a significantly larger part of airline revenues and cargo revenues are making it possible for airlines to sustain their skeleton international networks.”
While in 2019 cargo was responsible for 12% of industry revenues, for this year the proportion is predicted to be 36%. Cargo revenues, which stood at $102.4-billion in 2019, are expected to reach $117.7-billion this year. The grounding of airliners has removed a lot of belly-hold cargo capacity from the market; total cargo capacity has been cut by 45%. This has driven yields up for those aircraft carrying cargo (whether dedicated freighters or adapted airliners) by 30% this year.
Strong cargo performance is expected to continue next year. Total cargo volumes are forecast to increase from 54.2-million tons this year to 61.2-million tons next year (almost the same as the 61.3-million tons carried in 2019). This rise is expected to result from improved business confidence and the need to distribute Covid-19 vaccines around the world. But capacity will remain constrained owing to a continuing lack of airliner belly-hold volume. Yields are thus predicted to increase by another 5%. Air cargo revenues next year should reach $139.8-billion, which would be a record figure.