The International Air Transport Association (IATA) expects the aviation industry’s net losses of $ 47,7 billion in 2021, a significant improvement in the industry’s estimated net loss, as last year the estimate was estimated to be around $ 126,4 billion.
The recovery of the aviation industry is expected to begin in the second half of 2021. Restart plans as well as preparation for recovery depend on governments to establish clear plans so as not to waste time restarting the sector when the epidemiological situation allows reopening of borders, IATA points out They call on governments to announce opening plans as soon as possible.
"This crisis is longer and deeper than anyone could have expected. Losses will decrease from 2020, but the pain in the crisis is growing. There is optimism in domestic markets where aviation resilience is shown in market jumps without internal travel restrictions. The government, however, has imposed travel restrictions, continuing to dampen strong demand for international travel. Despite an estimated 2,4 billion people traveling by plane in 2021, airlines will burn an additional $ 81 billion in cash ”Said Willie Walsh, CEO of IATA.
Of course, IATA means that concrete reopening plans are known in stages, as, for example, the United Kingdom did, where it was known exactly in which phases the opening of the economy started, how the number of new cases began to decrease.
"Most governments have not yet provided clear indications of the benchmarks they will use to safely restore people’s freedom of travel. Meanwhile, a significant portion of GDP of $ 3,5 trillion and 88 million aviation-backed jobs are at risk. An effective relaunch of aviation will boost the passenger and tourism sectors and the wider economy. As the virus becomes endemic, it is important to learn to live, work and travel safely with it. This means that governments must focus on risk management to protect livelihoods but also lives Said Walsh.
The entire industry will emerge from the crisis financially weakened, while the focus for airlines will be on minimizing costs, wherever possible, which is key to restoring financial health, Walsh said, adding that everyone must be aligned in understanding that increased travel costs mean a slower economic recovery, as cost-cutting efforts are needed on all sides for airlines to recover.
Travel restrictions, including quarantines, have lowered demand
IATA estimates that the travel sector (measured in passenger mileage revenue or RPKs) will be at 43% of the 2019 level this year. While this is an improvement of 26% in 2020, it is far from recovering. Domestic markets will improve faster than international travel, and the total number of passengers is expected to reach 2,4 billion in 2021. This is an improvement of almost 1,8 billion who traveled in 2020, but well below the top of 4,5 billion in 2019.
International passenger traffic is lower by 86,6% compared to the pre-crisis level during the first two months of 2021.
Progress in vaccination in developed countries, particularly the United States and Europe, combined with widespread testing capacity, is expected to allow for the return of certain international travel in the second half of the year.
Current demand is at 34% compared to demand in 2019.
If we compare last year and this year, 2021 and 2020 have opposite patterns of demand. So in 2020 it started strong and ended weakly, while in 2021 it starts weakly and is expected to strengthen towards the end of the year.
The lifeline that keeps the airline alive is the growing freight traffic, which we have written about before.
Freight or cargo traffic surpassed passenger business during the crisis, and this trend is expected to continue through 2021. This year, demand for cargo is expected to increase by 13,1% during 2020.
This puts freight traffic on a positive balance compared to pre-crisis levels. Namely, in 2020, freight traffic recorded a year-on-year decline of 9,1% compared to 2019, and according to IATA estimates, the total amount of cargo is expected to reach 63,1 million tons in 2021, which is almost at the level of and before the crisis (63,5 million tons in 2018)
In addition to those tested, vaccination will play a key role in reopening international travel
When we talk about recovery, there is a significant difference between regions with large domestic markets and regions that rely primarily on international traffic. Losses are the largest in Europe (-22,2 billion USD) with only 11% of its passenger traffic (CTR) being domestic.
North American carriers are in the best position due to the rapid pace of vaccination, as well as high traffic in domestic travel to the United States. European carriers are heavily dependent on international passenger revenues, with domestic markets accounting for only 11% of CTRs. On the other hand, Asia-Pacific carriers have 45% of their CTRs generated in domestic markets, and they will benefit from the recovery strength of the Chinese domestic market, as well as the relative importance of air cargo for the region. Middle Eastern carriers will benefit from relatively fast vaccination rates in domestic markets, but their recovery will be hampered by continued travel restrictions. Latin American carriers have an advantage because almost half (48%) of their CTRs are generated in domestic markets, especially in the large Brazilian domestic market.