Air losses will take time to resolve

Anticipated historic losses and rapidly increasing debt pose a challenge to return to profitability in the civil aviation industry, which was not in sight until 2022.

The International Air Transport Association (IATA) predictions released on Tuesday reflect the rather brutal shock of the pandemic and related restraint measures. Airlines expect to lose US $ 84.3 billion in 2020, for a net profit margin of –20.1%. Revenues will fall by 50% to 419 billion, against 838 billion in 2019. In 2021, losses should decrease to 15.8 billion, while revenues will amount to 598 billion, says the Association , which represents some 290 airlines claiming 82% of the world’s air traffic.

In comparison, they lost $ 31 billion during the Great Recession of 2008-2009.

“Financially, 2020 has been the worst year in aviation history. On average, each day of this year brings losses of $ 230 million to the industry, “added Alexandre de Juniac, director general and chief executive officer of IATA. “This means that, according to the forecast number of 2.2 billion passengers this year – compared to 4.54 billion reached in 2019 -, the airlines will lose $ 37.54 per passenger. “

In the balance sheet, the airlines had started the year 2020 in good health, a decade of profits having made it possible to maintain the debt at a level known as relatively low of 430 billion, that is to say approximately half of the annual incomes. “Essential government assistance has helped airlines avoid bankruptcy, but added $ 120 billion to liabilities, total debt rising to $ 550 billion or about 92% of projected revenues for 2021,” says l ‘IATA.

The industry expects in 2020 a slow recovery in traffic, which will not prevent it from falling by 54.7% compared to 2019. “The number of passengers should be cut in half to 2.25 billion. Passenger sector revenues would thus stand at 241 billion against 612 billion in 2019. “The fall is worse than the drop in demand, which reflects the expected 18% drop in yields, as airlines will try to encourage people to travel by offering better prices. Seat load factors are expected to average 62.7% in 2020, from a record 82.5% in 2019.

By 2021, the industry is expected to substantially reduce its losses, to around US $ 5 for each passenger transported, to bring the net profit margin to -2.6%. “Airlines will be in recovery mode, but activities will remain well below 2019 levels.” IATA estimates total passenger numbers will rebound to 3.38 billion and total revenue will increase by 42% compared to 2020 but remaining 29% lower than in 2019.

These estimates depend in particular on operational efficiency in the context of a pandemic, the duration and depth of the recession and the return of travelers’ confidence. “People will want to fly again, provided they have confidence in their personal financial situation and in the measures taken to ensure the safety of travelers,” summarizes IATA.

“As long as there is not an even more damaging second wave of COVID-19, the worst of this traffic collapse is probably behind us,” said de Juniac. “The key to recovery lies in the universal implementation of the restarting measures adopted by the International Civil Aviation Organization to ensure the safety of passengers and crews. And thanks to effective contact tracking, these measures will give governments the confidence to open borders without quarantine measures, “he said.

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