IATA calls for more government help as it predicts $47.7bn airlines loss in 2021

posted on 22nd April 2021 by Edward Robertson
IATA calls for more government help as it predicts $47.7bn airlines loss in 2021

IATA is calling on governments around the world to start planning for a serious resumption of aviation and offer better financial support as it predicts the airline industry will lose $47.7 billion this year.

Director general of the association Willie Walsh said the losses predicted for 2021 are a considerable improvement on the $126.4 billion lost in the sector in 2020.

However, he added this year’s losses will cause more pain, coming on top of the serious financial difficulties airlines are already suffering in the wake of last year.

Walsh said: “This crisis is longer and deeper than anyone could have expected. Losses will be reduced from 2020, but the pain of the crisis increases.

“There is optimism in domestic markets where aviation’s hallmark resilience is demonstrated by rebounds in markets without internal travel restrictions.

“Government imposed travel restrictions, however, continue to dampen the strong underlying demand for international travel. Despite an estimated 2.4 billion people travelling by air in 2021, airlines will burn through a further $81 billion of cash.”

Walsh said governments can start addressing the issue with a three-point plan, starting with governments having plans in place for the proper resumption of international flights once borders are re-opened.

He added: “Most governments have not yet provided clear indications of the benchmarks that they will use to safely give people back their travel freedom.

“In the meantime, a significant portion of the $3.5 trillion in GDP and 88 million jobs supported by aviation are at risk. Effectively restarting aviation will energize the travel and tourism sectors and the wider economy.

“With the virus becoming endemic, learning to safely live, work and travel with it is critical. That means governments must turn their focus to risk management to protect livelihoods as well as lives.”

Walsh said further employment support, on top of what has already been provided, will be required by governments in order to help mitigate this year’s airline cash burn of $81 billion which comes following the $149 billion in 2020.

He added: “Owing to government relief measures, cost-cutting, and success in accessing capital markets, some airlines appear able to ride out the storm.

“Others are less well-cushioned and may need to raise more cash from banks or capital markets. This will add to the industry’s debt burden, which has ballooned by $220 billion to $651 billion.

“There is a definite role for governments in providing relief measures that ensure critical employees and skills are retained to successfully restart and rebuild the industry.”

Finally, Walsh urged governments to keep an eye on potential spiralling costs, ranging from Covid-19 tests for potential travellers to new fees within the industry, as global travel resumes.

He said: “Containing and reducing costs will be top of mind for airlines. Governments and partners must have the same mentality. And that must be reflected in items big and small.

“There can be no tolerance for monopoly infrastructure suppliers gouging their customers to recoup losses through higher charges.

“Equally, we demand an end to the extortionate costs for Covid-19 testing with governments taking their cut on top of that with taxes. Everyone must be aligned in understanding that increased travel costs will mean a slower economic recovery. Cost reduction efforts on all sides are needed.”

IATA’s latest plea for greater government assistance comes as the association predicts that 2021 air travel, measured in revenue passenger kilometres (RPK), will recover to 43 per cent of 2019 levels over the year, representing a 26 per cent increase on 2020.

Domestic travel will continue to grow more quickly, with overall passenger numbers expected to reach 2.4 billion in 2021, 600 million more than in 2020 but well below the 2019 peak of 4.5 billion.

Meanwhile, international passenger traffic remained 86.6 per cent down on pre-crisis levels for the first two months of 2021.

Walsh said while the second half of the year is predicted to be better, with demand reaching 34 per cent of 2019 levels, this will still equate to zero international growth once 2021 is compared with 2020.

The reduced traveller numbers mean airline passenger revenues are expected to total $231 billion, a certain improvement on the $189 billion received in 2020 but still depressingly lower than the $607 billion generated in 2019.

This means IATA is predicting 2021 airline industry revenues will total $458 billion, up 23 per cent on 2020’s $372 billion but 55 per cent down on 2019’s $838 billion.