A Poorer And Smaller Reshaped Airline Industry
This is an abbreviated version of the ATW article by Karen Walker - A Reshaped Airline Industry Will Be Poorer And Smaller.
In six words, IATA director general and CEO Alexandre de Juniac summed up the state of the global airline industry as it lurched toward the end of 2020. “The numbers couldn’t get much worse,” he said at the IATA AGM in late November, the organization’s first-ever virtual event because, cruelly, the COVID-19 virus and global border closures and quarantines prevented even airline leaders from convening for real.
Indeed, the numbers are almost incomprehensible for an industry that until January 2020 was in high growth mode and had been consistently profitable as a collective for 10 years. In a staggering reversal of fortune, IATA expects the industry to post a net loss of $118.5 billion for 2020 and for the net loss in 2021 to be an improved but still devastating $38.7 billion.
Globally, IATA expects that 2021 passenger numbers will grow to 2.8 billion in 2021, which will still be 1.7 billion travelers short of 2019 performance. Passenger yields are expected to be flat and the load factor is expected to grow to 72.7%, an improvement on the 65.5% expected for 2020, but still well below the 82.5% achieved in 2019.
“We’ve got a 50% rise in travel in 2021 from the low levels in 2020 and then a much stronger rise in 2022 before regaining levels in 2023/2024. It will take some time to get back because governments are going to be cautious. We will need an effective testing platform to go along beside vaccines and we think that there will be some scarring from the economic crisis and the health crisis,” IATA chief economist Brian Pearce said.
The 2021 top imperative for all airlines will be to stop burning through cash.
“Cash is king. Cash is whether you can survive or not, and with revenues of half of what they were, you are talking about a very significant downsizing in costs. For any business today, it’s not loss or profit that really matters. It’s cash,” Pearce said.
One likely outcome is more industry consolidation in 2021 and beyond.
“I would expect through failures or through mergers you could see more consolidation and that makes a lot of sense, but government involvement does complicate things. I see governments that provide taxpayer money [to airlines] being reluctant to see that disappear,” Pearce said.
Read more about the lessons learned, the reshaped industry and specific regional outlooks in the full article - A Reshaped Airline Industry Will Be Poorer And Smaller - by Karen Walker