The airline industry cannot slash costs sufficiently to neutralise severe cash burn to avoid bankruptcies and preserve jobs in 2021, according to analysis undertaken by the International Air Transport Association (Iata) and presented at a briefing yesterday.
The association has reiterated its call for government relief measures to sustain airlines financially and avoid massive employment terminations. Iata also called for pre-flight Covid-19 testing to open borders and enable travel without quarantine.
Total industry revenues in 2021 are expected to be down 46% compared to the 2019 figure of $838 billion. The previous analysis was for 2021 revenues to be down around 29% compared to 2019. This was based on expectations for a demand recovery commencing in the fourth quarter of 2020. Recovery has however been delayed owing to new Covid-19 outbreaks and government-mandated travel restrictions, including border closures and quarantine measures. Iata expects full-year 2020 traffic to be down 66% compared to 2019, with December demand down 68%.
“The fourth quarter of 2020 will be extremely difficult and there is little indication the first half of 2021 will be significantly better, so long as borders remain closed and/or arrival quarantines remain in place. Without additional government financial relief, the median airline has just 8.5 months of cash remaining at current burn rates. And we can’t cut costs fast enough to catch up with shrunken revenues,” said Alexandre de Juniac, Iata’s director general and CEO.
Fuel is the only bright spot, says De Juniac, with prices down 42% on 2019. But unfortunately, they are expected to rise next year as increased economic activity raises energy demand.
“There is little good news on the cost front in 2021. Even if we maximise our cost cutting, we still won’t have a financially sustainable industry in 2021,” he said.