The global airline industry will continue to be in the red throughout 2021, according to a new analysis which the International Air Transport Association (IATA) released last night ( February 24, 2021).
It was a reversal of the association’s November 2020 analysis indicating that airlines would turn cash positive in the fourth quarter of this year.
With estimates for 2021 cash burn almost doubling from November’s $48 billion to as much as $95 billion todate, , airlines are not expected to be cash positive until 2022.
IATA revised its estimates after the industry showed a weak start for 2021.
Already, it’s clear that the first half of 2021 will be worse than earlier anticipated because governments tightened travel restrictions in response to new COVID-19 variants.
Forward bookings for summer (July-August) are currently 78% below levels in February 2019 (comparisons to 2020 are distorted owing to COVID-19 impacts).
In an optimistic scenario, travel restrictions gradually lifted once the vulnerable populations in developed economies have been vaccinated.
In this case, 2021 demand would be 38% of 2019 levels. Airlines would burn through $75 billion of cash over the year.
Still, the cash burn of $7 billion in the fourth quarter would be significantly improved from an anticipated $33 billion cash burn in the first quarter.
However, in a pessimistic scenario, governments will retain significant travel restrictions through the peak northern summer travel season.
In this case, 2021 demand would only be 33% of 2019 levels and airlines will burn through $95 billion over the year.
“With governments having tightening border restrictions, 2021 is shaping up to be a much tougher year than previously expected,” stressed Alexandre de Juniac, IATA’s Director General and CEO.
“Our best-case scenario sees airlines burning through $75 billion in cash this year. And it could be as bad as $95 billion,” he reiterated.
“More emergency relief from governments will be needed. A functioning airline industry can eventually energize the economic recovery from COVID-19.”
“But that won’t happen if there are massive failures before the crisis ends. If governments are unable to open their borders, we will need them to open their wallets with financial relief to keep airlines viable,” de Juniac concluded.