The International Air Transport Association (IATA) released its financial outlook for the global air transport industry showing that airline losses are expected to top US$84 billion in 2020 and see a gradual recovery by 2021 — although still below the levels seen before the coronavirus outbreak in 2019.

IATA said net profit margin for the year will fall -20.1% while revenues will fall 50% to US$419 billion from US$838 billion in 2019.

Next year, airline losses are expected to be cut to US$15.8 billion as revenues rise to US$598 billion.

Worst year in history of aviation

“Financially, 2020 will go down as the worst year in the history of aviation. On average, every day of this year will add US$230 million to industry losses. In total that’s a loss of US$84.3 billion. It means that — based on an estimate of 2.2 billion passengers this year— airlines will lose US$37.54 per passenger,” said Alexandre de Juniac, IATA’s director general and CEO noting the importance of government financial relief as airlines burn through cash.

“Provided there is not a second and more damaging wave of COVID-19, the worst of the collapse in traffic is likely behind us,” de Juniac added further saying that it is important for people to fly again to boost economic recovery with about 10% of the world’s GDP from tourism — and much of that depends on air travel. 

2020 main forecast drivers

IATA said passenger demand evaporated as international borders closed and countries locked down to prevent the spread of the virus and this is the biggest driver of industry losses.

At the low point in April, global air travel was roughly 95% below 2019 levels although there are already indications that traffic is slowly improving.

Passenger revenues according to IATA is expected to fall to US$241 billion (down from US$612 billion in 2019).

Cargo: one bright spot of aviation

Despite the steep losses in passenger flights, IATA said cargo operation is the one bright spot in the aviation industry at this moment.

Compared to 2019, it said overall freight tonnes carried are expected to drop by 10.3 million tonnes to 51 million tonnes. However, a severe shortage in cargo capacity due to the unavailability of belly cargo on (grounded) passenger aircraft is expected to push rates up by some 30% for the year.

IATA said cargo revenues will reach a near-record US$110.8 billion in 2020 (up from US$102.4 billion in 2019).

As a portion of industry revenues, cargo will contribute approximately at least 26% from 12% in 2019.

2020 Regional Performance

In terms of regional performance, IATA said all regions will post losses in 2020.

The crisis has taken on a similar dimension in all parts of the world with capacity cuts lagging about 10-15 percentage points or more behind the over-50% fall in demand.

Nonetheless, IATA said as Asia-Pacific was the first region to feel the brunt of the COVID-19 crisis. It is expected to post the largest absolute losses in 2020.

Reduced Losses in 2021

Meanwhile, with open borders and rising demand in 2021, IATA said the industry is expected to cut its losses to US$15.8 billion for a net profit margin of -2.6%.

It said airlines will be in recovery mode but still well below pre-crisis levels (2019) on many performance measures.
 

• Total passenger numbers are expected to rebound to 3.38 billion (roughly 2014 levels when there were 3.33 billion travellers), which is well below the 4.54 billion travellers in 2019.
• Overall revenues are expected to be US$598 billion which would be a 42% improvement in 2020, but still 29% below 2019’s US$838 billion.
  
  It said cargo’s enlarged footprint in the air transport industry will remain, however.
  
  "Cargo revenues will reach a record US$138 billion (a 25% increase on 2020). That is about 23% of total industry revenues, roughly double its historical share," IATA said.
  
  Air cargo demand is also expected to be strong as businesses restock at the start of the economic upturn, while a slow return of the passenger fleet will limit the growth of cargo capacity, and keep cargo yields steady at 2020 levels.

“Airlines will still be financially fragile in 2021. Passenger revenues will be more than one-third smaller than in 2019. And airlines are expected to lose about US$5 for every passenger carried. The cut in losses will come from re-opened borders leading to increased volumes of travellers,” said de Juniac. 

He noted that strong cargo operations and comparatively low fuel prices will also give the industry a boost but competition among airlines will no doubt be even more intense.

“The challenge for 2022 will be turning reduced losses of 2021 into the profits that airlines will need to pay off their debts from this terrible crisis,”  de Juniac added.

A challenging recovery

IATA also said although losses will be significantly reduced in 2021 from 2020 levels, the industry’s recovery is expected to be long and challenging.