IATA is projecting airlines will post their largest ever collective net loss this year, totalling $84.3 billion, and will remain in the red in 2021, as the association made its first projection of the scale of industry losses since the coronavirus crisis hit.
The airline association had already indicated global passenger traffic this year would be roughly half 2019 levels as lockdowns and travel restrictions brought international passenger services to a virtual standstill in the second quarter.
IATA has estimated a collective industry net loss of $84 billion for 2020. The figure, which surpasses the $30 billion loss made during the financial crisis in 2008 and 2009, confirms the extent of losses suffered by airlines during the crisis and brings a 10-year run of profits to an end. IATA had in December projected industry profits could reach almost $30 billion this year.
The $84.3 billion loss virtually wipes out the $91.3 billion net profits the industry posted over the past three years.
Airlines in all regions will suffer. IATA estimates net losses will represent negative margins of between 15-30% of revenues across the different regions in 2020.
While IATA expects a sharp improvement in passenger demand in 2021, albeit still below 2019 levels, a tough cost and yield environment will keep airlines in the red.
Detailing the latest outlook, IATA chief economist Brian Pearce explains: ”In this particular forecast we have taken a view that Covid-19 will steadily be contained, so we have not built in a second wave of Covid.
”We are basing it on a phased opening of markets, but have been rather cautious on the return of business travel and passenger confidence, and have built in the impact of the recession, which will damage the ability of people to travel.
”We are still expecting to see a significant rise of revenues in 2021, that will allow airlines to substantially reduce their losses, but we wouldn’t expect to see those losses eliminated in 2021. We are still expecting net losses of $15.8 billion.”
He adds: ”That is a similar pattern to the one we saw in the global financial crisis in 2008 and 2009. Obviously much larger, but if you look back at that period, the depth of the crisis, followed by a better performance but still a loss, before a recovery in the subsequent years.”
”We haven’t put out a forecast beyond 2021. If you follow the trend, 2022 looks like it could be a year for a return to profit and certainly that would be in line with our longer-term forecasts in growth in passenger markets.”
