COVID-ravaged airlines tipped to lose another $US48bn in 2021

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April 22, 2021
COVID
Photo: O'Hare International Airport.

Global domestic airline demand is expected to close in on pre-COVID levels later this year but the industry worldwide is still tipped to lose $US47.7 billion as overall passenger numbers reach less than half of 2019 levels.

The latest International Air Transport Association outlook, its first update since November, estimates global passenger numbers will hit 2.4 billion in 2021, an improvement of almost 1.8 billion compared to 2020 but well down from the 4.5 billion peak in 2019.

While the expected industry loss is a significant improvement on the 2020 estimated net loss of $US126.4 million, the continuing economic pain reflects the crushing impact of international COVID travel restrictions, including quarantine.

READ: IATA boss lauds Aussie-Kiwi travel bubble as a model for others.

The net result is that overall demand will recover to 43 percent of 2019 levels over the year, a level IATA notes is an improvement “but far from recovery”.

The airline group expects COVID vaccination campaigns, particularly in the US and Europe, to combine with testing regimes to boost demand for international services in the second half of the year.

However, it forecasts international demand will only return to 34 percent of 2019 levels. That’s still an improvement on the first two months of 2021, which saw demand down 88.6 percent below pre-COVID levels.

It also notes 2021 and 2020 had opposite demand patterns, with 2020 starting strong and ending weak and 2021 doing the reverse.

“The result will be zero international growth when comparing the two years,” it says.

The picture is brighter for global domestic travel, which is benefiting from strong GDP growth (5.2 percent), accumulated consumer disposable cash during lockdowns, pent-up demand, and the absence of domestic travel restrictions.

IATA estimates that domestic markets could recover to 96 percent of 2019 levels in the second half of 2021, a 48 percent improvement on 2020 performance.

“This crisis is longer and deeper than anyone could have expected. Losses will be reduced from 2020, but the pain of the crisis increases,” says IATA director general Willie Walsh.

“There is optimism in domestic markets where aviation’s hallmark resilience is demonstrated by rebounds in markets without internal travel restrictions.

“Government-imposed travel restrictions, however, continue to dampen the strong underlying demand for international travel.

“Despite an estimated 2.4 billion people traveling by air in 2021, airlines will burn through a further $US81 billion of cash.”

IATA expects significant differences between regions with this year’s losses highest in Europe (-$US22.2 billion), where only 11 percent of passenger traffic is domestic, and lower in the US (-$US5 billion) and the Asia-Pacific (-$US10.5 billion) where domestic markets are larger.

Estimated Losses in other areas include $US4.2 billion in the Middle East, $4 billion in Latin America and $1.7 billion in Africa.

IATA is continuing to urge governments to have plans in place so no time is lost in restarting the sector when borders re-open and to provide more industry support to help financially-ailing carriers.

It says the industry will come out of the crisis financially weakened and there will be a need for cost containment and reductions.

It also notes there are worrying cost trends in fuel and infrastructure such as airports and air navigation service providers attempting to recoup their own losses.

“The cost of jet kerosene fell to $US46.60 a barrel in 2020,” it says “But, with the pick-up in economic activity fuel costs are on the rise. Jet kerosene is expected to rise to an average of $US68.90 a barrel in 2021, nearing the 2019 average price of US$77 a barrel.”
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