Airlines to suffer $84B loss

Airline losses are surging to unprecedented levels that are expected to be more than double those following the 2008 global economic slump, according to the industry’s main trade group. The International Air Transport Association on Tuesday predicted carriers will lose a combined record of $84 billion this year and almost $16 billion in 2021. This compares with $31 billion during the last recession. Biggest losses in history?

The grim forecast comes as airlines seek to gradually restart operations following the grounding of their fleets during the height of the coronavirus pandemic. Industry debt has jumped by about $120 billion, a level many carriers will be unable to sustain without governments stepping in to convert borrowing into equity, the trade body said. The alternative to a rise in government ownership will be mass bankruptcies, it said.

“Losses this year will be the biggest in aviation history,” IATA Chief Executive Officer Alexandre de Juniac said on a call with reporters. “There is no comparison for the dimensions of this crisis.”

Profitability off the table for now

Losses will amount to between 15% and 30% of revenue this year depending on the region, with no prospect of a return to profitability until 2022 at the earliest, IATA forecast. Airlines are set to end the year with about $550 billion in total debt. That means the sector’s borrowings next year will be 16 times earnings even on an Ebitdar basis, stretching from 4.6 times in 2019.

What’s next

While some carriers may be able to cope by raising fresh equity themselves, stretched balance sheets are likely to lead to many states buying stakes, it said. Global connectivity will also be reduced, with the number of city-pair links down by about 25% by the end of the year even after operations resume, the trade body said. Yields, a measure of fares, are likely to be down by around 20% as airlines cut prices to attract passengers back to travel.

CHRISTOPHE ENA / AP 2019 Airline losses will amount to between 15% and 30% of revenue this year depending on the region, with no prospect of a return to profitability until 2022 at the earliest, an industry group says.