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FRA | Nov 24, 2020

IATA: Airlines set to lose $157 billion amid worsening slump

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An airplane from Turkish Airlines prepares to land at Cointrin airport in Geneva, Switzerland December 5, 2017. (File Photo: REUTERS/Pierre Albouy)

PARIS (Reuters)

Airlines are on course to lose a total $157 billion this year and next, their main global body warned on Tuesday, further downgrading its industry outlook in response to a second wave of coronavirus infections and shutdowns afflicting major markets.

The International Air Transport Association (IATA), which in June had forecast $100 billion in losses for the two-year period, said it now projects a $118.5 billion deficit this year alone, and a further $38.7 billion for 2021.

The bleak outlook underscores challenges still facing the sector despite upbeat news on development of COVID-19 vaccines, whose global deployment will continue throughout next year.

“The positive impact it will have on the economy and air traffic will not happen massively before mid-2021,” IATA Director General Alexandre de Juniac told Reuters.

PASSENGER REVENUE TO PLUNGE

Passenger numbers are expected to drop to 1.8 billion this year from 4.5 billion in 2019, IATA estimates, and will recover only partially to 2.8 billion next year. Passenger revenue for 2020 is expected to have plunged 69 per cent to $191 billion.

“That’s by far the biggest shock the industry has experienced in the post-World War II years,” IATA Chief Economist Brian Pearce said.

The forecasts assume significant re-opening of borders by the middle of next year, helped by some combination of COVID-19 testing and vaccine deployment.

“Systematic testing is even more critical to reopen borders than the vaccine.”

IATA Director General Alexandre de Juniac

IATA reiterated its call for governments to replace travel-stifling quarantine regimes with widespread testing programmes.

“We are seeing states progressively coming to listen to us,” de Juniac said, citing testing initiatives underway in France, Germany, Italy, Britain, the United States and Singapore.

While some governments and airlines such as Australia’s Qantas say passengers are likely to require vaccination for long-haul travel, the approach is unlikely to work everywhere, de Juniac said.

“It would prevent people who are refusing (the vaccine) from travelling,” the IATA chief said. “Systematic testing is even more critical to reopen borders than the vaccine.”

HIGHER FREIGHT LEAD TO JUMP IN AIR CARGO REVENUE

Air cargo, a rare bright spot for the industry as the grounding of flights pushes freight prices higher, will likely see global revenue rise 15 per cent to $117.7 billion this year despite an 11.6 per cent decline in volume to 54.2 million tonnes, IATA said.

Some $173 billion in government aid has left recipients with debts that threaten to hobble future investment, it warned, and more bankruptcies are likely. Norwegian Air became the latest casualty on November 18, when it filed for bankruptcy protection in Ireland.

The average airline now has enough liquidity to survive another 8.5 months, while some have just weeks, Pearce said. “I think we will get consolidation through some airline failures.”

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