The International Air Transport Association (IATA) has improved the aviation industry’s projected 2021 losses, from $126.4 billion (net profit margin of -33.9%) earlier, to $47.7 billion (net profit margin of -10.4%).

However, IATA Director General Willie Walsh said that the pain of the crisis continued to increase.

“Despite an estimated 2.4 billion people travelling by air in 2021, airlines will burn through a further $81 billion of cash,” he warned.

Travel restrictions, including quarantines, have killed demand for international travel.

“This crisis is longer and deeper than anyone could have expected,” Walsh acknowledged.

IATA estimates that travel (measured in revenue passenger kilometres or RPKs) will recover to 43% of 2019 levels over the year.

While that is a 26% improvement on 2020, it is far from a recovery.

Also, domestic markets will improve faster than international travel.

Overall passenger numbers are expected to reach 2.4 billion in 2021. That is an improvement on the nearly 1.8 billion who travelled in 2020, but well below the 2019 peak of 4.5 billion.

International passenger traffic remained 86.6% down on pre-crisis levels over the first two months of 2021.

Vaccination progress in developed countries, particularly the US and Europe, is expected to combine with widespread testing capacity to enable a return to some international travel at scale in the second half of the year, reaching 34% of 2019 demand levels.

Significantly, 2021 and 2020 have opposite demand patterns: 2020 started strong and ended weak, while 2021 is starting weak and is expected to strengthen towards year-end.

The result will be zero international growth when comparing the two years.

Nevertheless, domestic passenger traffic is expected to perform significantly better than international markets.

This is driven by strong GDP growth (5.2%), accumulated consumer disposable cash during lockdowns, pent-up demand, and the absence of domestic travel restrictions.

IATA estimates that domestic markets could recover to 96% of pre-crisis (2019) levels in the second half of 2021. That would be a 48% improvement on 2020 performance.

Significant differentiation is emerging between

But regions with large domestic markets, like Asia-Pacific, will have a smaller loss of $10.5 billion.

Losses are highest in Europe (-$22.2 billion) with only 11% of its passenger traffic (RPK) being domestic.

Asia-Pacific carriers see 45% 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.

So far, cargo has outperformed the passenger business throughout the crisis. That trend is expected to continue throughout 2021.

Demand for cargo is expected to grow by 13.1% over 2020. This puts the cargo business in positive territory compared to pre-crisis levels (2020 saw a full-year decline of 9.1% compared to 2019).

Total cargo volumes are expected to reach 63.1 million tonnes in 2021. That’s nearly at the pre-crisis peak of 63.5 million tonnes which occurred in 2018.

Overall, the aviation industry revenues are expected to total $458 billion, just 55% of the $838 billion generated in 2019.

Still, this represents 23% growth on the $372 billion generated in 2020.

Passenger revenues are expected to total $231 billion, up from $189 billion in 2020, but far below the $607 billion generated in 2019.

Cargo revenues are expected to reach $152 billion, a historic high.

This is up from $128 billion in 2020 and $101 billion in 2019. Capacity remains constrained owing to the large-scale grounding of the passenger fleet.

This removed significant belly capacity, driving up yields 40% in 2020, with a further 5% growth expected in 2021.

This year, cargo will account for a third of industry revenues, yet this cannot offset the dramatic decline in passenger revenues.

IATA’s revised outlook points to the start of industry recovery in the latter part of 2021 but the association continues to urge governments to put plans in place so that no time is lost in restarting the sector when borders reopen.

“Most governments have not yet provided clear indications of the benchmarks that they will use to safely give people back their travel freedom,” says the IATA Director General.

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, he argued.

The whole industry will come out of the crisis financially weakened. Cost containment and reductions, wherever possible, will be key to restoring financial health.

“Containing and reducing costs will be top of mind for airlines,” he noted. “Governments and partners must have the same mentality. There can be no tolerance for monopoly infrastructure suppliers gouging their customers to recoup losses through higher charges.”

Furthermore, “We demand an end to the extortionate costs for COVID-19 testing with governments taking their cut on top of that with taxes,” Walsh concluded.


Source: Manila Bulletin (https://mb.com.ph/2021/04/22/iata-improves-2021-aviation-outlook/?utm_source=rss&utm_medium=rss&utm_campaign=iata-improves-2021-aviation-outlook)