The world’s airlines will this year continue to make tens of billions of dollars of losses, and burn through an even greater amount of cash, as a result of the continuing Covid-19 pandemic, the International Air Transport Association (Iata) has reported. However, things will be much less bad than last year and the sector should begin to recover in the later part of the year.

The association, which is the representative body for the global airline industry, now predicts that the sector will suffer net losses of $47.7-billion this year, representing a net profit margin of –10.4%. This however is a great improvement over last year’s estimated net losses of $126.4-billion and a net profit margin of –33.9%.

“This crisis is longer and deeper than anyone could have expected,” affirmed Iata director-general Willie Walsh. “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 travelling by air in 2021, airlines will burn through a further $81-billion of cash.”

Air passenger demand has been “killed” (Iata’s word) by government travel restrictions, including quarantines. The association does expect that air travel demand this year will improve, to reach 43% of 2019 figures. Although a 26% improvement over 2020 demand, it does not amount to a recovery. Total air passenger numbers are forecast to reach 2.4-billion this year, up from almost 1.8-billion last year, but still well down on the 4.5-billion peak reached in 2019.

Domestic air passenger markets are predicted to recover much faster than the international markets. Global gross domestic product (GDP) growth is expected to be strong this year, at 5.2%, and, coupled with no restrictions on domestic air travel, pent-up demand, and an accumulation of consumer disposable cash caused by lockdowns, will drive this recovery. Iata believes that domestic air travel markets will, during the second half of this year, reach 96% of 2019 levels. This would amount to an improvement of 48% in relation to 2020.

International air passenger markets are expected to benefit from the roll-out of vaccination programmes, especially in Europe and the US, as well as from the implementation of large-scale testing programmes. But, by the second half of this year, international air travel demand will have reached only 34% of what it was in 2019.

As throughout the crisis, the picture for air cargo was very different. Iata predicts that the air cargo sector will continue to outperform the air passenger sector. Air cargo demand this year is expected to be 13.1% more than during last year. Total air cargo volumes are likely to reach 63.1 Mt this year, which almost matches the pre-crisis peak year of 2018, when total demand came to 63.5 Mt.

In consequence, cargo revenues this year are expected to hit an all-time high, reaching $152-billion. The figure for last year was $128-billion and for 2019, $101-billion. Air cargo capacity remains limited because large numbers of airliners, which carry cargo in their belly holds, are still parked due to lack of passenger demand. As a result, cargo yields were driven up 40% last year and are expected to grow by a further 5% this year. During this year, air cargo will contribute 33% of total airline revenues, far above the normal 10% to 15%.

But cargo’s success is not enough to offset the severe loss of passenger revenues. While predicted passenger revenues for this year, at $231-billion, will be significantly higher than last year’s figure of $189-billion, they will still be far below the $607-billion achieved in 2019.

“Most governments have not yet provided clear indications of the benchmarks that they will use to safely give people back their travel freedom,” warned Walsh. “In the meantime, 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. This means that governments must turn their focus to risk management to protect livelihoods as well as lives.”