Global Air Transport Industry Devoured By COVID-19

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2019 was the global air transport industry’s 10th consecutive year of profitability and forecasters were confident of an uptick in 2020 that would see airlines post a $29.3 billion profit. Passenger numbers would increase 4% to 4.72 billion, the forecasts said. And there was general confidence that 2019 illustrated the industry would no longer plunge into financial crisis even when countering a difficult trade environment.

COVID-19 has not just rewritten the airline economics rulebook—it has devoured it.


What must be remembered about the 2020 crisis is that even when it was going relatively well—and 2019 was still good compared to most years in previous decades—it was only 20 to 30 airlines that were performing at investor-grade levels. A long tail of airlines followed that were already in a fragile financial position, carried significant debt and were vulnerable to any cash shock, let alone the knockout punch that COVID delivered.

The double-grim reality is that most airlines not only went into the pandemic with too much debt, but those that survive 2020 will go into 2021 even further leveraged.

Survival is the overriding priority for most airlines this year, but ultimately this industry must reevaluate long-held assumptions that debt is the basis on which it does business.