European airlines can expect to be the last to reduce their net losses, new research by IATA warns.
As the association’s director general Willie Walsh warns that airlines face global losses of $47.7 billion in 2021, its own research shows that Europe faces particular difficulties.
IATA is now predicting that in 2021, Europe’s demand will be down by 66.3 per cent compared to pre-Covid-19 2019 figures, with capacity reduced by 57.1 per cent. Financially speaking, this equates to net losses of $22.2 billion, -23.9 per cent of revenues, in 2021.
The research shows that European airlines are the most exposed to the ongoing Covid-19 crisis as domestic flights, which offer the best chance of growth as they are not subject to international border closures, represent just 11 per cent of revenue passenger kilometres (RPKs).
Nor are the continent’s international travel bans expected to be dropped soon, the report adds.
The uneven roll out of the vaccination programme across Europe will limit the number of international markets reopening this year while the vital transatlantic market is only expected to see slow recovery.
On the other hand, North American carriers are best placed to take advantage of the rapid vaccination boost to domestic travel in the US, as well as the strong economy driving air cargo demand.
As a result, losses are reduced to the lowest in any region at -2.7% of total revenues at $5 billion.
Asia-Pacific carriers see 45 per cent of their RPKs generated on domestic markets and will benefit from the strength of the Chinese domestic market recovery, as well as the relative importance of air cargo to the region.
Net losses are expected to be reduced to -8.8 per cent of revenues this year, equalling $10.5 billion.
Latin American carriers are equally set to do well thanks to having almost half – 48 per cent – of their RPKs being generated on domestic markets, in particular the large Brazilian home market.
Despite starting from relatively large losses in 2020 and, in some parts of the region, a slow rate of vaccination, revenues from the growth in domestic travel are forecast to cut net losses by more than two-thirds this year—to -20.4 per cent of revenues in 2021, equating to $4 billion
Meanwhile, Middle Eastern carriers will benefit from relatively rapid vaccination rates on home markets but face issues thanks to continued travel restrictions on many of the routes to emerging economies that are served through Gulf hub connections.
Net losses in 2021 are forecast at -13.8 per cent of revenues at $4.2 billion.
Finally, Africa’s slow vaccination rates mean international travel will be limited and so hitting hard a region that generates 14 per cent of RPKs via domestic aviation.
Furthermore, relatively weak economic growth will also limit the extent of pent-up demand. However, net losses are expected to fall this year to -24 per cent at a total of $1.7 billion.