BACK ON TRACK
Domestic aviation market to return to profitability by the end of 2020
Chinese domestic aviation market will return to profitability by the end of 2020 as domestic market demand grows. The announcement was made by the International Air Transport Association ( IATA) on its revised performance outlook for the airline industry in 2020 and 2021.
Although important industry losses will continue into 2021, overall performance is expected to improve over the next year. China is leading the recovery of world aviation with a large domestic demand that will allow carriers to register profits, according to the association.
IATA said airlines have cut costs by 45.8 percent, but revenues are down 60.9 percent. This means that airlines will lose about $ 66 for every passenger carried this year, for a total net loss of $ 118.5 billion. This loss will be reduced sharply by $ 80 billion in 2021. However, the prospect of losing $ 38.7 billion next year is nothing to celebrate.
In detail, passenger numbers are
expected to plummet to 1.8 billion this year ( 60.5 percent down from the 4.5 billion passengers in 2019), roughly the same number registered by the industry in 2003. Revenues are expected to fall to $ 191 billion, less than a third of the $ 612 billion earned in 2019.
However, airline financial performance is expected to see a significant turn for the better in 2021, even if historically deep losses prevail. A $ 38.7- billion loss in 2021 is expected, and will be second only to the poor performance registered in 2020.
While all regions are impacted by the crisis, those carriers with access to larger domestic markets, or with large cargo operations, are performing better. IATA said the differences between the regions become more visible in 2021 with Asia- Pacific and North American carriers seeing the most significant reductions in expected losses.
According to IATA, China will lead the recovery of the world airline industry thanks to the success in virus control ahead of vaccine distribution and growing demand for air cargo. These are factors leading to this region experiencing stronger financial performance than other regions.
Data from Civil Aviation Administration of China ( CAAC) showed that, although the rate of recovery of civil aviation transportation slowed down in October, the industry still carried just over 50 million passengers in that month.
Overseas transportation
The reactivation of the Chinese domestic market also triggered enthusiasm amongst overseas carriers in China.
All Nippon Airways’ China- Japan routes are gradually resuming, with flights from Shanghai, Guangzhou and Qingdao operating weekly. Starting from December 14, the carrier will open a new route between Shenzhen and Tokyo.
Air France- KLM began to gradually resume some routes in June after nearly five months of suspension. Currently, Air France- KLM operates multiple flights between Paris, Amsterdam and the four cities of Beijing, Shanghai, Hangzhou and Chengdu.
The industry still faces challenges for its recovery, including travel restrictions and quarantine measures that effectively lead to a weak international aviation market.