The coronavirus pandemic is responsible for “the worst year in the history of aviation” and is set to cost airlines around the world more than $84bn in 2020, according to an industry report.
The health crisis, which saw flight schedules cut by 95% at the height of the outbreak in April, will cut carrier revenues by half to $419bn compared to a year ago, said trade body International Air Transport Association (IATA).
Groups from American Airlines to British Airways are still some way off flying half of their flights, with many industry leaders saying carriers will take up to three years to recover from lockdown measures and international travel bans.
This year airlines will lose over $37 for every passenger they carry, said the report published on Tuesday.
Airlines will lose money on every passenger they fly this year
Next year, IATA estimates global airlines will lose $15.8bn while revenues rise to $598bn, but still 29% lower than 2019.
“Financially, 2020 will go down as the worst year in the history of aviation, said IATA director general Alexandre de Juniac.
He added: “On average, every day of this year will add $230m to industry losses. In total that’s a loss of $84.3bn. It means that—based on an estimate of 2.2 billion passengers this year—airlines will lose $37.54 per passenger. That’s why government financial relief was and remains crucial as airlines burn through cash.”
Travel restrictions are “slowly improving”, the report said, but passenger numbers expected to fall by 54.7% compared to 2019. Traffic is expected to roughly halve to 2.25 billion passengers, equal to 2006 levels.
This year governments spent billions of dollars bailing out domestic airlines, which are considered strategically important.
Bailouts were handed out to Delta Air Lines in the US, to EasyJet in the UK. The latest lifeline was thrown to Cathay Pacific on Tuesday which was given a $5bn bailout by the Hong Kong government could take a 6% stake in the airline and can have two observers on its board.
Pain to continue next year
Airline stock around the world has plunged as a result. On Tuesday share trading in America’s United Airlines closed at $44.64, while on Wednesday morning in Europe British Airways owner IAG stock is 307.7p, both down by half this year.
The pain will continue into next year, said the IATA study.
It forecasts passenger numbers will rebound to 3.38 billion, roughly 2014 levels, but that is still well below the 4.54 billion travellers the industry flew in 2019.
Airlines next year will on average operate with a net profit margin of minus 2.6%.
They will also see their collective debt levels jump from $430bn, roughly half of last year’s annual revenues, to $550bn, which is expected to be 92% of revenues in 2021. Higher bond repayments hinder an airlines ability to afford new planes and launch new services.
IATA’s de Juniac said: “Airlines will still be financially fragile in 2021. Passenger revenues will be more than one-third smaller than in 2019. And airlines are expected to lose about $5 for every passenger carried.”
But he added that it is vital to revive the airline industry as an artery of world trade.
The IATA boss said that international travel is “an important part of the economic recovery because about 10% of the world’s gross domestic product is from tourism and much of that depends on air travel. Getting people safely flying again will be a powerful economic boost.”