Worldwide, the number of flights is still around 47% lower than the same period last year. Airlines have been cutting costs substantially, but cash burn is forecast to continue until the fourth quarter of next year. The industry is forecast to make net losses of $118 billion this year. Deep industry losses will continue into 2021, even though performance is expected to improve over the period of the forecast (see IATA’s Economic Performance of the Airline Industry report).
While the industry will see improved performance in 2021 compared to 2020, the road to recovery is expected to be long and difficult. Passenger volumes are not expected to return to 2019 levels until 2024 at the earliest, with domestic markets recovering faster than international services. In the short term, the industry is facing many challenges such as airlines debt levels, border closures and lock downs in many developed markets due to second waves and lagging passenger confidence.
The news of an effective vaccine by Pfizer/BioNTech, Moderna and Oxford-Astra Zeneca is a game changer, expected to support recovery in 2021 and beyond. Even though the vaccine news is positive, recovery will still take time due to potential issues with vaccine availability on a wide scale and distribution and the impact of economic damage.
Air transport is an industry accustomed to managing unforeseen shocks, but this pandemic and the related global economic recession is well beyond anything experienced previously. As always, airlines and the broader air transport industry will play an important role in this economic restart and recovery. Indeed, we have observed this already, with the vital role being played by air cargo to ship medical products all around the world and to help overcome the disruption in global supply chains.
Thus, support for the industry as a whole, not just airlines, remains critical going forward. This support needs to be in a form which does not create an excessive debt burden for the industry. Both governments and industry partners need to work together to speed up recovery of the industry.
The industry will undoubtedly be changed as a consequence of this pandemic experience – both in terms of its operations and processes, but also perhaps in terms of consumer behaviour. Some of these impacts could be enduring, driving long-term structural changes to our industry and its outlook.
Our annual Strategic Partners’ Workshop in end October 2020 investigated questions as discussed above, bringing together the diverse perspectives and healthy exchange of views that our Workshop has become known for. Established five years ago, the IATA Economics Strategic Partners involvement has steadily grown, attracting new members each year. Our flagship event took place online this year as a two-day Workshop on October 29-30. This was a success, but we are all looking forward to a return to the highly interactive face-to-face workshop format in 2021.
Our 2020 Workshop brought our Strategic Partners together to focus on the recovery of the industry and the transitioning to a new reality. We discussed the most pressing issues, trends and developments and their implications for the industry outlook, including both activity – on a global and regional level – and financial impacts.
With the ongoing evolution of the pandemic and the related economic and industry developments, it is more important than ever to stay informed. The IATA Economics team is regularly releasing research and analysis on various issues on our website and our (100% free to download and use) mobile app to provide insight and to help guide your decision-making during this unusual time. Please get in touch if you are interested in joining the group.
Emi Mima
Economist
IATA
www.iata.org/economics
