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IATA Estimates Airlines Set to Lose $84 Billion in 2020
Airlines will lose $84 billion in 2020, the biggest loss of cash ever according to the forecast of International Air Transport Association (IATA) which was announced on Tuesday. The losses are expected to total approximately $16 billion in 2021 as the aviation industry recovers from the impacts of the coronavirus pandemic.
IATA says that airlines lost $31 billion in 2008 and 2009 when the oil prices peaked at $147, showing the depth of the current aviation crisis.
The aviation association predicts that the revenue, which was $838 billion last year, will likely reduce by half to $419 billion.
“Financially, 2020 will go down as the worst year in the history of aviation,” said Alexandre de Juniac, IATA’s Director General and CEO.
“On average, every day of this year will add $230 million to industry losses. It means that based on an estimate of 2.2 billion passengers for 2020-airlines will lose $37.54 per passenger. That’s why government financial relief was and remains crucial as airlines burn through cash.”
The unprecedented slump in demand for air travel due to flight restrictions and lockdowns is viewed as the main driver of the losses.
Global air travel reached the lowest point in April when it was almost 95% lower than 2019 levels. Even if the air traffic appears to be improving, IATA forecasts that it will fall 54.7% compared with 2019 traffic levels.
Passenger numbers are calculated to be 2.2 billion in 2020, which is similar to 2006 levels. Although the numbers will increase up to 3.38 billion in 2021, it is still 25% lower than 2019 levels.
IATA sets out that though the passenger demand decreases sharply, costs do not go down in that way. Even though the expenses cost $517 billion-34.9% below 2019 levels- airlines will see 50% drops in revenues.
According to the calculations, unit costs will rise by 14.1% as certain costs will be shared by fewer passengers. There will likely be fewer passengers on board than the previous years due to restrictions and measurements, which will also contribute to the rising costs.
The bright side seems to be fuel prices averaging $36.8 in 2020, almost half of 2019 levels when a barrel of fuel cost $77. Fuel will comprise 15% of overall cost of airlines in 2020. It accounted for 23.7% of all costs in 2019
Cargo transportation will offer some relief to the airlines, reaching approximately $111 billion in 2020. This will contribute approximately 26% to aviation industry revenues, which is 12% up from 2019 levels.
“Airlines will still be financially fragile in 2021. Passenger revenues will be more than one-third smaller than in 2019. And airlines are expected to lose about $5 for every passenger carried. The cut in losses will come from re-opened borders leading to increased volumes of travelers. Strong cargo operations and comparatively low fuel prices will also give the industry a boost.” said the chief executive of IATA.
“Competition among airlines will no doubt be even more intense. That will translate into strong incentives for travelers to take to the skies again. The challenge for 2022 will be turning the reduced losses of 2021 into the profits that airlines will need to pay off their debts from this terrible crisis,” added Juniac.
According to the chief executive, approximately 80% of people tell that they will not travel if quarantine restrictions are imposed by governments. Screening measures, social distancing, better sanitization, mask-wearing and effective contact tracing should be enough for governments to open borders without quarantine rules.
“The outlook is challenging to say the least. But aviation is a resilient industry. With a globally harmonized and mutually recognized approach to the re-start measures, we can rebuild the confidence of travelers and kick-start the recovery in aviation and more broadly,” said the chief of the association.
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