IATA predicts $95bn airlines cash burn in 2021 due to Covid-19

posted on 26th February 2021 by Eddie Saunders
IATA predicts $95bn airlines cash burn in 2021 due to Covid-19

By Edward Robertson

IATA is warning the world’s airline industry faces another bad year with 2021 expected to be cash negative as airlines burn between $75 billion and $95 billion just to stay in business.

The money required to keep airlines in business is nearly double the previously predicted sum of $48 billion and comes as the first half of 2021 is worse for the aviation industry than originally predicted.

Problems have arisen as new, more contagious variants have emerged around the world, causing governments to again close borders and in doing so, crushing hopes that as vaccination programmes rolled out across the world, so travel restrictions would ease.

Already, evidence is emerging of the impact of the ongoing pandemic on the market, with forward bookings for July and August 78% lower than they were in February 2019.

As a result, IATA is warning that the best case scenario for global aviation this summer is that travel restrictions are gradually lifted once a country’s most vulnerable citizens have been vaccinated leading to “tepid demand” in summer 2021 and 38 per cent of 2019 levels.

This would lead to a cash burn of $75 billion over the year, although the final quarter’s predicted $7 billion would be considerably less than the $33 billion predicted to have been spent in Q1 2021.

Meanwhile, the worst case scenario of a $95 billion spend would be as a result of ongoing significant restrictions throughout the peak northern hemisphere summer season with demand falling to 33 per cent of 2019 levels.

IATA director general and CEO Alexandre de Juniac said: “With governments having tightening border restrictions, 2021 is shaping up to be a much tougher year than previously expected.

“Our best-case scenario sees airlines burning through $75 billion in cash this year. And it could be as bad as $95 billion. More emergency relief from governments will be needed.

“A functioning airline industry can eventually energise 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 added a number of measures can be taken to alleviate the pain, including plenty of planning with governments giving airlines adequate warning to airlines as to when services can resume.

Health credentials will also need to be established, with vaccines and testing likely to dominate travel, he said, adding IATA’s Travel Pass would allow travellers to safely share their data with the relevant authorities.

Furthermore, de Juniac argued that global standards on tests and vaccines will need to be put in place, saying: “Speed is critical. Fraudulent Covid-19 test results are already proving to be an issue.”

Despite the ongoing threat to the world’s airlines, airports and their ground handlers and maintenance companies have used the downtime to revise, overhaul and reconsider operations.

Both Swissport and Aviator have seen their businesses grown in Europe through deals with Lufthansa and SAS respectively, while dnata has been its enhancing the safety and efficiency of its dangerous goods handling.

Meanwhile, the adoption of new technologies in airports as far afield as Salt Lake City International Airport in the US and Holland’s Amsterdam Schiphol Airport should make for more efficient businesses as services slowly resume.