Airlines see virus loss reaching US$157 billion
Crisis called ‘devastating and unrelenting’
Record airline losses from the coronavirus outbreak will continue to mount next year as anticipated vaccination programs take time to revive travel demand, according to the industry’s main trade group.
The International Air Transport Association on Tuesday predicted carriers will lose a combined US$157 billion in 2020 and 2021, almost 60 per cent more than it had suggested in June and five times the deficit racked up during the 2008- 2009 recession. It called the crisis “devastating and unrelenting.”
The forecast comes as airlines cling to hopes that passenger testing combined with the rollout of COVID-19 vaccinations next year will spur governments to ease travel restrictions they say are to blame for holding back bookings. IATA said the industry won’t turn cash positive until the fourth quarter of 2021, though that’s earlier than expected before recent advances in vaccine tests.
“The history books will record 2020 as the industry’s worst financial year, bar none,” IATA chief executive Alexandre de Juniac said, adding that the loss expected next year, while lower, will be the second-worst ever.
Willie Walsh, the former CEO of British Airways parent IAG SA who takes over from De Juniac in April, criticized countries for effectively barring people from travelling and said he aims to change attitudes among policy-makers.
“We know they want to fly,” he told IATA’S online annual meeting after being confirmed in the role. “But they have been denied that freedom by a disjointed political response and certain governments which failed to adopt measures that would have allowed services to continue.”
IATA predicts that carriers will lose almost US$ 39 billion in 2021, more than double the June prediction. That’s on top of a US$ 118.5 billion deficit this year, up 40 per cent from the previous outlook after a new wave of lockdowns wiped out a brief resurgence in flights late in the northern summer.
The biggest concern is that the industry will run out of cash before the vaccine boost kicks in, with carriers having reserves for only 8.5 months, based on the median figure, IATA Chief Economist Brian Pearce said in a presentation.
A spate of airline failures is therefore likely without further government help on top of US$173 billion already received, he said. Carriers in emerging markets where vaccines might not be available until 2022 are most vulnerable.
Industry revenue will likely decline by half a trillion dollars this year to US$ 328 billion following a 61 per cent drop in traveller numbers to levels last seen 17 years ago, according to IATA. That will edge back up to US$ 459 billion in 2021. Passenger traffic overall is unlikely to reach pre-pandemic levels until 2024, Pearce said.
De Juniac called for borders to be reopened now, without quarantines, using testing and travel corridors, while cautioning against “complex” route- specific requirements once vaccines become the norm.
He declined to endorse Qantas Airways Ltd. CEO Alan Joyce’s suggestion that carriers require future international passengers to have a COVID-19 shot before they fly, saying it’s too early to speculate about what their role will be.
An increasing number of airlines are turning to digital health passports as a way to certify testing results. The Commons Project Foundation said Tuesday that Jetblue Airways Corp., Deutsche Lufthansa AG, Swiss International, United Airlines Holdings Inc. and Virgin Atlantic Airways will begin rolling out its Commonpass mobile app to passengers in December from New York, Boston, London, and Hong Kong.
IATA plans to hold its next annual meeting in Boston in June. The association’s new board chairman Robin Hayes, CEO of Jetblue Airways, which has a hub in the city, said he expects the event to take place live and in person.
Lufthansa chief Carsten Spohr, who Hayes succeeds, said business people are beginning to tire of communicating via video conference and that most are eager to fly as soon as possible.