Airlines likely to remain cash negative throughout 2021
KUALA LUMPUR: The airline industry is expected to remain cash negative throughout 2021, with estimated cash burn ranging between US$75 billion to US$95 billion from a previously anticipated US$48 billion, according to the International Air Transport Association’s (IATA) latest analysis.
IATA said the previous analysis in November 2020 indicated that airlines would turn cash positive in the fourth quarter of this year.
“At the industry level, airlines are now not expected to be cash positive until 2022,” it said in a statement yesterday.
It said factors that contributed to the latest findings included the weak start for 2021, as governments had tightened travel restrictions in response to new Covid-19 variants.
“Forward bookings for summer (July-August) are currently 78 per cent below levels in February 2019 (comparisons to 2020 are distorted owing to Covid-19 impacts),” the trade association said.
From this lower starting point for the year, IATA said, an optimistic scenario would see travel restrictions gradually lifted once the vulnerable populations in developed economies had been vaccinated, but only in time to facilitate tepid demand over the peak summer travel season in the northern hemisphere.
In this case, 2021 demand would be 38 per cent of 2019 levels.
“Airlines would burn through US$75 billion of cash over the year. But cash burn of US$7 billion in the fourth quarter would be significantly improved from an anticipated S$33 billion cash burn in the first quarter,” it said.
Under the pessimistic scenario, it said airlines were seen burning through US$95 billion over the year. The driver of this scenario would be governments retaining significant travel restrictions through the peak northern summer travel season.
With governments having tightening border restrictions, IATA director general and chief executive officer Alexandre de Juniac said 2021 was shaping up to be a much tougher year than previously expected.
“More emergency relief from governments will be needed. A functioning airline industry can eventually energize the economic recovery from Covid-19. But that won’t happen if there are massive failures before the crisis ends.
“If governments are unable to open their borders, we will need them to open their wallets with financial relief to keep airlines viable,” he said.