IATA: Industry losses will continue into 2021

Performance is projected to improve, although a full recovery is not expected until 2024

The International Air Transport Association (IATA) has announced that industry losses will continue into 2021 despite predictions that performance is expected to improve.

Cutting of costs is expected to continue alongside increased demand during 2021. By the fourth quarter of next year, the industry is projected to turn cash positive – earlier than initially thought.

Throughout 2020, the aviation industry has struggled to survive. There has been a half-trillion dollar revenue drop, pushing airlines to cut costs by $365bn.

Alexandre de Juniac, IATA’s Director General and CEO, said, “The history books will record 2020 as the industry’s worst financial year, bar none.”

It is predicted that passenger numbers will severely drop to 1.8 billion, similar to the amount recorded in 2003.

Due to the fall in traveller demand, passenger revenues are likely to fall to $191 billion – less than a third of the 2019 figure. International markets were also hit incredibly hard as they experienced a 75% fall in demand.

Passenger yields are also anticipated to decrease by 8% compared with 2019, alongside a weak passenger load factor, which is expected to be down by 65.5% compared with last year.

In 2021, passenger numbers are expected to grow to 2.8 billion, meaning a billion more passengers would travel compared with this year.

Operational parameters for cargo are currently more positive, although they are still not high as 2019. This side of aviation, however, is set to continue its recovery into 2021. Business confidence is improving, and distribution of the new vaccine will mean approximately 61.2 million tonnes in cargo volume growth.

De Juniac reiterated that the cargo industry is out-performing the passenger business. “It could not, however, make up for the fall in passenger revenue,” he added, “but it has become a significantly larger part of airline revenues, and cargo revenues are making it possible for airlines to sustain their skeleton international networks.”

Overall revenues are anticipated to grow to $495bn, with costs only expected to rise by $61bn, presenting an overall improved financial performance for 2021. It is apparent that the first half of next year is still looking tough for airports and airliners though.

There is constant worry regarding the challenges of recovery to the sector, as passenger volumes are not set to return to 2019 levels until 2024.

Financial support is also extremely crucial to the survival of the industry. Around $173bn of government support has been granted, yet this only gives the median airlines 8.5 months of money to survive.

“Bridging airlines to the recovery is one of the most important investments that governments can make,” said de Juniac. “It will save jobs and kick-start the recovery in the travel and tourism sector, which accounts for 10% of global GDP.”

The winter period is always slow for the industry, even without the pressures of the pandemic.

One of the biggest concerns for the reopening of the sector are the travel restrictions and quarantine regulations currently in place. Testing is an essential resource for the reopening of borders, as well as the distribution of the COVID-19 vaccine in the long-term.

“The thirst for the freedom to fly has not been overcome by the crisis,” concluded de Juniac. “There is every reason for optimism when governments use testing to open borders. And we need to make that happen fast.”