The airline industry is expected to make staggering losses of $47.7 billion in 2021 as the COVID-19 pandemic continues to weigh heavily on it, the International Air Transport Association (IATA) said in a report on Wednesday.
According to IATA, the figure translates to a net profit margin of -10.4 percent, which is an improvement compared to the estimated net industry loss of $126.4 billion last year (net profit margin of -33.9 percent).
IATA’s Director General Willie Walsh noted that government-imposed travel restrictions continued to dampen the “strong underlying demand” for international travel.
“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,” Walsh said.
Despite this grim outlook, IATA said industry revenues are expected to grow by 23 percent to $458 billion compared to the $372 billion which was generated in 2020. However, this year’s number is slightly more than half (55 percent) of the $838 billion generated in 2019.
Strengthening the rise in industry revenues is the “historic high” increase of cargo revenues to $152 billion up from $128 billion in 2020 and $101 billion in 2019.
Several airlines have resorted to increasing their cargo hauls in light of restrictions limiting passenger flights during the pandemic.
In this respect, the report estimated that cargo will account for a third of industry revenues which is more than twice its average contribution which ranges between 10-15 percent of total revenues.
“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).”
However, the significant rise in cargo revenue will not be able to offset the sharp decline in passenger revenues.
Meanwhile, passenger numbers are expected to improve with domestic passenger traffic expected to perform significantly better than international markets due to restrictions.
IATA said it expected passenger numbers to hit 2.4 billion compared to the figure of close to 1.8 billion in 2020, but well below the 2019 figure of 4.5 billion.
The report also cautioned that airlines had been unable to cut costs as fast as revenues had fallen, with worrying cost trends being witnessed in fuel and infrastructure.
IATA said that in the face of the ongoing crisis, a number of immediate measures had to be implemented to prop up the industry.
IATA appealed to governments to have plans in place for a restart in preparation for a recovery so as not to waste time once borders are reopened.
“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,” Walsh said.
IATA also called for more government relief measures, especially in the form of employment support programs and cost containment and reductions, wherever possible.
“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,” Walsh noted.