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Aviation: Despite recovery expected in 2021, global airline industry’s losses to be higher than during the global financial crisis

The global airline industry is expected to see a net loss of $118.5 billion in 2020, with a recovery of $80 billion estimated in 20201, according to IATA’s November release. Despite the expected fall back, the industry is likely to experience a net loss of $38.7 billion next year, higher than that reported in 2008.

November 27, 2020 / 08:41 AM IST

The global airline industry is expected to see a net loss of $118.5 billion in 2020, with a recovery of $80 billion estimated in 20201, according to the International Air Transport Association’s (IATA) outlook released on November 24.

Despite the expected fall back, the industry is likely to experience a net loss of $38.7 billion next year, higher than that reported ($26 billion) during the global financial crisis in 2008, analysis of past records show.

The industry registered a 30 percent decline in its net profit from the high of $37.6 billion in 2017 to $26.4 billion in 2019.

“This crisis is devastating and unrelenting,” Alexandre de Juniac, IATA’s Director General and CEO said. “Airlines have cut costs by 45.8 percent, but revenues are down 60.9 percent. The result is that airlines will lose $66 for every passenger carried this year for a total net loss of $118.5 billion. This loss will be reduced sharply by $80 billion in 2021. But the prospect of losing $38.7 billion next year is nothing to celebrate. We need to get borders safely re-opened without quarantine so that people will fly again. And with airlines expected to bleed cash at least until the fourth quarter of 2021 there is no time to lose,” he said.

performance of global airlines

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The world-wide spread of novel coronavirus has severely impacted the airline industry, and the re-rise in cases in some parts of the world indicate a slower recovery going forward. The global revenue passenger kilometres (RPKs) are estimated to have declined by 66 percent--largest ever since World War II. Economic recession and weak consumer confidence too has affected the recovery, the IATA states.

Also Read: Air traffic continues its slow but steady rise. So, where’s everyone flying?

As a result of the impact, airlines have slashed their costs from $795 billion in 2019 to $430 billion in 2020--by nearly 46 percent. The fuel expenses have been cut down by 70 percent from $188 billion in 2019 to $55 billion in 2020. Earlier, fuel cost comprised almost one-fourth of the total expenses, which has now been reduced to an expected 13 percent in 2020.

Performance of global commercial airlines

The overall revenue of global airlines has seen a drop of nearly 61 percent from $838 billion in 2019 to an estimated $328 billion in 2020. However, this is likely to recover by almost 40 percent next year, as forecasted.

“The history books will record 2020 as the industry’s worst financial year, bar none,” said de Juniac. “Airlines cut expenses by an average of a billion dollars a day over 2020 and will still rack-up unprecedented losses. Were it not for the $173 billion in financial support by governments we would have seen bankruptcies on a massive scale.”

The COVID-19 impact has also been equally damaging for the Indian aviation industry, reporting significant revenues losses across the board. To overcome the crisis, IATA has now urged the Indian government to support the Indian airlines industry.

Financial recovery of airlines is first expected in the Asia-Pacific region--attributed to large domestic markets in China and India, along with the regional manufacturing hubs that will help generate revenues for the cargo sector, according to IATA.
Chaitanya Mallapur
first published: Nov 27, 2020 08:25 am

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