Airline industry to make $118bn loss in 2020

The airline industry will incur a $118bn net loss in 2020. But the tide will continue in 2021 with losses still hitting $38bn, the International Air Transport Association (IATA) said on Tuesday.

IATA says the availability of a coronavirus vaccine in the second half of the year is “anticipated to be a turning point.” But the recovery of the airline industry will be gradual since distribution will take time.

“We expect the share of world GDP spent on air transport to be 50% in 2021, half of the pre-crisis levels,” says IATA.

“A number of airlines have substantial cash reserves to survive until revenues rise strongly late next year. But many airlines do not.”

In Europe alone, many travel companies made major changes just to survive, including British Airways owner IAG. The company cut 10,000 jobs. Engine maker Rolls Royce is planning to cut at least 1,400.

Easing lockdowns

The news comes as a number of airline industry stocks on Tuesday saw shares momentarily surge. The market became more optimistic about the introduction of a COVID-19 vaccine.

Travel and leisure stocks further benefited from news that the UK government confirmed an easing of travel quarantine rules and lockdown restrictions in England.

France also says it will lift coronavirus lockdown on December 15. But bars and restaurants will stay closed over the Christmas period.

It was part of a three-stage easing of restrictions over the next two months.

While the road to recovery is long, IATA says the story is not uniform across the world. There are regional variations. This includes North America, the strongest performer in the pre-crisis period, seeing an estimated loss of $48.5bn in 2020. Although its 2021 recovery can be “prompt” compared with other regions. The net profit margin is improving to -6.8% from -41.4% in 2020.

Europe will also have a more “gradual” recovery due to a slower economic rebound. The net losses forecast is $11.9bn, which corresponds to 12% of forecast revenues, says IATA.

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