Net airline industry losses to be $47.7 billion
This is an improvement on the estimated net industry loss of $126.4 billion in 2020 (net profit margin of -33.9%).
IATA continues to urge governments to have plans in place so that no time is lost in restarting the sector when the epidemiological situation allows for a re-opening of borders.
Industry losses of this scale imply a cash burn of $81 billion in 2021 on top of $149 billion in 2020. Government financial relief measures and capital markets have been filling this hole in airline balance sheets, preventing widespread bankruptcies. The industry will recover but more government relief measures, particularly in the form of employment support programmes, will be needed this year.
The whole industry will come out of the crisis financially weakened. Cost containment and reductions, wherever possible, will be key to restoring financial health.
Travel restrictions, including quarantines, have killed demand. IATA estimates that travel (measured in revenue passenger kilometers or RPKs) will recover to 43% of 2019 levels over the year. While that is a 26% improvement on 2020, it is far from a recovery.
Domestic markets will improve faster than international travel. Overall passenger numbers are expected to reach 2.4 billion in 2021. That is an improvement on the nearly 1.8 billion who traveled in 2020, but well below the 2019 peak of 4.5 billion.
International passenger traffic remained 86.6% down on pre-crisis levels over the first two months of 2021. Vaccination progress in developed countries, particularly the U.S. and Europe, is expected to combine with widespread testing capacity to enable a return to some international travel at scale in the second half of the year, reaching 34% of 2019 demand levels. 2021 and 2020 have opposite demand patterns: 2020 started strong and ended weak, while 2021 is starting weak and is expected to strengthen towards year-end. The result will be zero international growth when comparing the two years.
Domestic passenger traffic is expected to perform significantly better than international markets.
This is driven by strong GDP growth (5.2%), 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% of pre-crisis (2019) levels in the second half of 2021. That would be a 48% improvement on 2020 performance. ■