Contributor - Europe

Cathy Buyck

The world’s airlines are expected to report a record $118.5 billion net loss this year and suffer a half-trillion-dollar revenue drop from $838 billion in 2019 to $328 billion, the International Air Transport Association said on Tuesday. On a per passenger basis, airlines are projected to make a staggering&nbsp;$66 loss on average. The projected losses mark the end of 10 consecutive years of profitability and a major deterioration on IATA’s previous outlook, released in June, when it expected the global airline industry to close 2020 with an $84.3 billion net loss.

 


Next year, the industry is expected to fare better but still lose $38.7 billion—$22.9 billion more than what it had predicted in June—which exceeds the losses airlines jointly accrued after 9/11 and after the global financial crisis in 2008/09.

 


Speaking at the IATA annual general meeting, its first virtual AGM since its founding 75 years ago, chief economist Brian Pearce described Covid-19 as the “biggest shock to hit aviation since World War II.” Global passenger traffic, measured in revenue passenger kilometers (RPKs), is expected to be down by 66 percent by the end of the year, he said, adding that “all major operational parameters in the passenger business were negative.”

 


Passenger numbers are expected to plummet to 1.8 billion, a 60.5 percent shrinkage on the 4.5 billion passengers in 2019. “This is roughly the same number that the industry carried in 2003,” Pearce said. Passenger revenues are expected to fall to $191 billion, less than a third of the $612 billion earned in 2019. &nbsp;Passenger yields are expected to be down 8 percent compared to 2019 and load factor is estimated to average 65.5 percent, down from the 82.5 percent

 


“This crisis is devastating and unrelenting,” asserted outgoing IATA director general and CEO Alexandre de Juniac. He said national authorities’ efforts to control the spread of the coronavirus “have resulted in the greatest de-connecting of people since the Second World War. Borders are effectively closed. Our freedom of movement has been severely restricted. And the impact on aviation has been catastrophic.” Cargo is a bright spot, he said, adding that with volumes 8 percent below 2019, “it’s hardly good news.”

 


De Juniac announced Monday evening he was stepping down from his role effective March 31, 2021, and the AGM approved the nomination of former International Airlines Group (IAG) CEO, Willie Walsh, as his successor. De Juniac became the head of IATA in September 2016 and the board of governors in December last year said they would recommend an extension of the term of office of the 58-year Frenchman and former Air France KLM CEO to the association's AGM.

 


According to IATA, de Juniac made known his intention to step down “several months ago” which enabled a search process to facilitate a smooth leadership transition. “I did not come to this decision lightly,” de Juniac stressed, noting that he had led a restructuring of IATA in order for it to “survive the crisis and be ready to support the industry recovery with an organization dimensioned to serve a smaller industry. The building blocks for an industry recovery are in place. And now is the right time to hand over IATA’s leadership for the long process of recovery.”

 


Walsh insisted that, like his predecessor, he is a businessman and&nbsp;understands how governments operate, and thus he is well suited to lead the airline trade body. However,&nbsp;he warned his “style will be different to what has gone before me.” He said he is “even more unhappy and more critical of how they [governments] get things done or more importantly, in many cases how they have failed to get things done.” Known as an unyielding cost-cutter, first as Aer Lingus and later at IAG’s founding airlines, British Airways and Iberia, Walsh in the past has lamented IATA’s lack of focus on the environmental sustainability challenge airlines are facing.

 


Pearce acknowledged that the projected improvement in airlines’ performance in 2021 assumes that there is “some” opening of borders by mid-year, either through testing or growing availability of a vaccine. Overall revenues are expected to grow to $459 billion, a $131 billion improvement on 2020 but still 45 percent below the $838 billion achieved in 2019. &nbsp;In comparison, costs are only expected to rise by $61 billion, delivering overall improved financial performance. Airlines will still lose, however, $13.78 for each passenger carried.

 


Passenger numbers are expected to grow to 2.8 billion in 2021. That would be a billion more travelers than in 2020, but still 1.7 billion travelers short of 2019 performance.

 


The cargo side of the business is expected to continue with strong performance, in part due to the role that air cargo will in vaccine distribution.

 


“A vaccine is the permanent solution we need. Recent news on progress is encouraging,” de Juniac said, reiterating <a href="https://www.ainonline.com/aviation-news/air-transport/2020-11-23/iata-unveils-travel-pass-facilitate-covid-test-acceptance">earlier statements</a> that the industry cannot wait for vaccine distribution to re-open borders for travel governments urgently must agree on a sed framework for systematic covid-19 testing.

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