By Kelvin Osa Okunbor
The International Air Transport Association (IATA) has revised its outlook for the airline industry with a projected net loss of $118 billion this year.
However, the association believes that things could look up in 2021, with a ‘vaccine bump’ expected during the fourth quarter (Q4), although it warned that some airlines may not survive to see this recovery.
According to the global airlines regulator, the unrelenting crisis of 2020 has had a devastating impact on the aviation industry.
Although IATA had previously projected losses of $84.3 billion in 2020 recent developments have pushed its new levels to a total net loss of $118.5 billion for the year.
Speaking in an online interview, its Director-General, Alexandre de Juniac said airlines have done a sterling job of cutting costs, driving down expenses by some 45.8 per cent. However, amid revenue reductions of more than 60 per cent, the cash burn has continued.
The association predicts that every passenger flown in 2020 will have lost $66 to the airline.
Its Chief Economist Brian Pearce presented a better outlook for 2021, with historical loss expected.
The progress being made on vaccines has given IATA reason to be optimistic, projecting a ‘bump’ in air travel demand by at least the fourth quarter of next year.
Overall, losses in 2021 are expected to be some $38.7 billion, with cash burn reducing as more passengers begin to fly.
He said: “This is based on the assumption that, by mid-2021, the vaccine will have become more widely available or that widespread testing will be in place. IATA believes that these measures will lead to opening of borders and an increase of a billion passengers over the course of the year.
“The impact of increased testing and vaccine availability is predicted to have the biggest bump in the fourth quarter of 2021. By then, IATA says that airlines could stop burning cash, and some could even become cash positive by the end of the year
“Despite some limited optimism for 2021, airlines are not out of the woods yet. Analysis by IATA shows that, on average, airlines had some 8.5 months of cash liquidity left, given the cash burn rate calculated in the second half of 2020. Some had significantly more than that, but there is a long tail of airlines with very much less than that too.
“With a very challenging first half of the year predicted, we could yet see some airlines fail. With a harsh winter ahead, IATA is hoping governments will step up again to sustain their air carriers, but in a way that does not add to the burgeoning debt.
“Bridging airlines to recovery is one of the most important investments that governments can make.”
Source: The Nation