Global airline industry expected to crash to largest losses yet
Iata forecasts in grim outlook that companies will lose $84.3bn for a net profit of -20.1%
The aviation industry is set to experience its worst year yet in 2020 as it continues to count its losses due to Covid-19 induced travel restrictions, Alexandre de Juniac, director-general and CEO of the International Air Transport Association (Iata) said on Tuesday.
Iata released a bleak financial outlook for the global air transport industry showing that airlines are expected to lose $84.3bn in 2020 for a net profit margin of -20.1%. Revenues will fall by half to $419bn from $838bn in 2019. In 2021, losses are expected to be cut to $15.8bn as revenues rise to $598bn.
African airlines are likely to incur a $2bn combined loss in 2020 due to a 58.5% fall in demand for air travel compared with 2019.
Worldwide, the industry continues to experience unprecedented turbulence with passenger demand plummeting to record lows due to Covid-19 travel restrictions as governments moved to contain the spread of the disease.
In SA, the airline industry, which is dominated by eight players, was given the green light to operate albeit for limited business travel under lockdown level 3 that came into effect on June 1. The industry has been on the brink of collapse after airlines were forced to cease operations since the hard lockdown came into force at end-March.
Before the health crisis hit, airlines and tourism in SA employed about 500,000 people and contributed about R180bn to the economy. Iata has estimated that jobs could now shrink by almost 50% and the contribution to the GDP could drop to almost R100bn.
“Financially, 2020 will go down as the worst year in the history of aviation. On average, every day of this year will add $230m to industry losses,” De Juniac said.
“In total that’s a loss of $84.3bn. 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,” he said.
De Juniac said provided there is not a second and more damaging wave of Covid-19, “the worst of the collapse in traffic is likely behind us”.
A key to the recovery is universal implementation of the restart measures agreed through the International Civil Aviation Organisation (Icao) to keep passengers and crew safe.
“And, with the help of effective contact tracing, these measures should give governments the confidence to open borders without quarantine measures. That’s an important part of the economic recovery because about 10% of the world’s GDP is from tourism and much of that depends on air travel. Getting people safely flying again will be a powerful economic boost,” De Juniac said.
Airlines will still be financially fragile in 2021, he said. Passenger revenues will be more than one-third smaller than in 2019. And airlines are expected to lose about $5 per passenger carried. De Juniac said the cut in losses will come from reopened borders leading to increased volumes of travellers. Strong cargo operations and comparatively low fuel prices will also give the industry a boost.
“Competition among airlines will no doubt be even more intense. That will translate into strong incentives for travellers to take to the skies again. The challenge for 2022 will be turning reduced losses of 2021 into the profits that airlines will need to pay off their debts from this terrible crisis,” De Juniac said.
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