According to a report released today by the International Air Transport Association (IATA), the aviation industry will lose around $84 billion by the end of the year. All regions have been affected by the virus outbreak and will report record losses, with revenues falling by over 50%. The report also predicts that 2021 will not see a return to 2019 levels.
The average loss per day
In a financial outlook report, the IATA claimed that “Financially, 2020 will go down as the worst year in the history of aviation.” The report highlights that an estimate of 2.2 billion passengers carried this year means airlines will, on average, lose $37.54 per passenger. The average loss per day for the rest of this year will likely come to $230 million, totaling $84.3 billion across the year.
The average of 2.2 billion passengers this year is roughly equivalent to 2006 levels meaning that COVID-19 has set the industry back by over a decade. At the lowest point in April, passenger demand was 95% lower than in 2019. Even if this now recovers, the IATA has predicted that for the whole of 2020, traffic levels for the year will still be just 55% of the previous year.
As expected, the virus has impacted the world on a global scale and is not limited by region. In North America, Passenger demand is down 52.6%, and capacity is down by 35%. Net profit is down by $23.1 billion, with only domestic offerings and CARES act loans propping up major airlines.
Across Europe, profit is down by an average of $21.5 billion. Very close to the levels in North America. Capacity has dropped by 43%, and demand is down by 56% as most airlines fly internationally across Europe. As borders within Europe reopen, the IATA predicts that enforced quarantine periods could still affect recovery.
The Asia Pacific has been the most affected in terms of profit. The area is down by $29 billion as it was the epicenter of the outbreak. However, African airlines have lost just $2 billion, although this could rise as the epidemic continues in the area.
There is also concern over the potential recovery of middle-eastern carriers. Most middle-east carriers are working as hubs to connect east to west. With low oil prices causing further economic uncertainty in the area and a reliance on international borders, there could be delayed recovery across the region.
More bad news in 2021
The industry is expected to recover slightly next year to cut losses to $15.8 billion. But that’s still -2.6% net profit. And passenger levels will only increase to around 3.4 billion. That’s how many people flew in 2014 and long way off from the 4.5 billion travelers last year. Overall revenues are likely to be around $598 billion, up 42% from this year but down 29% from 2019.
The good news is that fuel costs plummeted this year to an average of $36 per barrel. This will rise slightly to $52 per barrel next year. In 2019 the average price of a barrel was around $77.
All these predictions are based on the current situation. The IATA also made it very clear that a second wave of the virus could cause further damage to the industry in the long term.
A little bit of good news
Although the overwhelming message of the report was gloomy, there is some good news. Firstly, the IATA estimates that around 60% of travelers will look to travel just months after the virus is under control. Over 80% of people would be willing to travel if some form of quarantine measures are in place.
Finally, the IATA also suggests that although 2021 will see airlines losing an average of $5 per passenger, by 2022, airlines should be turning this around into profit and will be able to begin paying off debts. CEO Juniac also concluded that from this outbreak, the aviation industry would learn lessons and be better prepared for any future incidences.
What do you think of the report? Do you think it’s accurate? Will we start to see recovery in 2022, or is that too optimistic? Let us know your thoughts in the comments.