Airline losses are surging to unprecedented levels expected to be more than three times 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 $84 billion this year and almost $16 billion in 2021, its first estimate of the hit to earnings since the Covid-19 crisis began. That compares with $31 billion during the 2008-2009 recession.
he grim forecast comes as airlines seek to gradually restart operations with the pandemic beginning to recede. 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 state ownership would be mass bankruptcies, it said.
While IATA hasn’t previously estimated losses, it said the anticipated decline in passenger revenue this year has widened to $371 billion from the $314 billion forecasts in April. The drop including non-passenger sales may be $419 billion.
Losses will amount to between 15% and 30% of revenue depending on the region, with no prospect of a return to profitability until 2022 at the earliest even if there’s no second wave of coronavirus infections.
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. Only $11 billion of the $123 billion in various forms of aid provided so far has been in the form of direct investment.
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.