Alexandre de Juniac
Photo by: Iata
The International Air Transport Association (Iata), the representative body for the global air transport industry, has released its latest financial forecast for the sector. It expected the world’s airlines to sustain total losses of $84.3-billion this year. This would give a net profit margin of –20.1%. Revenues would be 50% lower than in 2019 – in monetary terms, amounting to $419-billion in comparison to 2019’s $838-billion.
“Financially, 2020 will go down as the worst year in the history of aviation,” affirmed Iata director-general and CEO Alexandre de Juniac. “On average, very day of the year will add $230-million to industry losses. … It means that – based on an estimate of 2.2-billion passengers this year – airlines will lose $37.54 per passenger. That’s why government financial relief was and remains crucial as airlines burn through cash.”
African airlines are expected to suffer a 58.5% drop in passenger demand this year. This would, in percentage terms, be the most severe fall in all the regions. The global average decline was expected to be 54.7%; Latin America would be second worst, with a drop of 57.4%, followed by Europe (down 56.4%), the Middle East (56.1% fall), the Asia-Pacific (53.8% decline) and North America (a drop of 52.6%).
African airlines were likely to see their passenger capacity fall by 50.4% and they were forecast to sustain losses of $2-billion. “The course of the virus in this region is yet to be fully seen,” observed Iata. “Nonetheless, border closures have all but stopped flights. International donors will be needed to supplement the limited means for the region’s governments to provide relief packages.”
Worldwide, while airline costs were also falling their decline was less than the drop in demand. Total airline expenses this year were predicted to come to $517-billion, which would be 34.9% down on those for 2019, but, to reiterate, revenues would fall 50%. As fixed costs would be spread across fewer passengers, non-fuel unit costs would jump by 14.1%.
However, lower fuel costs would provide some relief. Last year the average price of jet fuel was $77/barrel, but for this year it was forecast to be $36.8/barrel. In 2019, fuel was responsible for 23.7% of overall airline costs; this year, this proportion should be 15%.
And the situation was likely to start improving. “Provided there is not a second and more damaging wave of Covid-19, the worst of the collapse in traffic is likely behind us,” said De Juniac. “A key to the recovery is universal implementation of the re-start measures agreed through the International Civil Aviation Organisation to keep passengers and crew. And, with the help of effective contact tracing, these measures should give governments the confidence to open borders without quarantine measures.”
He highlighted that restarting international air travel would provide an important economic boost. Some 10% of the world’s gross domestic product was generated by tourism and much of the tourism industry was dependent on air travel.