Government Restrictions Continue To Dampen Demand
IATA is projecting net airline industry losses of $47.7 billion in 2021 (net profit margin of -10.4%); which is an improvement on the estimated net industry loss of $126.4 billion in 2020 (net profit margin of -33.9%).
Willie Walsh, IATA’s Director General, said that: “This crisis is longer and deeper than anyone could have expected. Losses will be reduced from 2020, but the pain of the crisis increases. There is optimism in domestic markets where aviation’s hallmark resilience is demonstrated by rebounds in markets without internal travel restrictions.”
But Walsh points out: “Government imposed travel restrictions, however, continue to dampen the strong underlying demand for international travel. Despite an estimated 2.4 billion people travelling by air in 2021, airlines will burn through a further $81 billion of cash.”
In the face of the ongoing crisis, IATA continues to urge governments to have plans in place so that no time is lost in restarting the sector when the epidemiological situation allows for a re-opening of borders.
Said Walsh: “Most governments have not yet provided clear indications of the benchmarks that they will use to safely give people back their travel freedom, In the meantime, a significant portion of the $3.5 trillion in GDP and 88 million jobs supported by aviation are at risk. Effectively restarting aviation will energize the travel and tourism sectors and the wider economy. With the virus becoming endemic, learning to safely live, work and travel with it is critical. That means governments must turn their focus to risk management to protect livelihoods as well as lives.”
The airline industry is also making it clear that while it will recover, more government relief measures, particularly in the form of employment support programs, will be needed this year.
IATA’s Director General said that: “Owing to government relief measures, cost-cutting, and success in accessing capital markets, some airlines appear able to ride out the storm. Others are less well-cushioned and may need to raise more cash from banks or capital markets. This will add to the industry’s debt burden, which has ballooned by $220 billion to $651 billion. There is a definite role for governments in providing relief measures that ensure critical employees and skills are retained to successfully restart and rebuild the industry.”
As well, IATA makes it clear that the whole industry will come out of the crisis financially weakened. Cost containment and reductions, wherever possible, will be key to restoring financial health.
Walsh said that: “Containing and reducing costs will be top of mind for airlines. Governments and partners must have the same mentality. And that must be reflected in items big and small. There can be no tolerance for monopoly infrastructure suppliers gouging their customers to recoup losses through higher charges. Equally, we demand an end to the extortionate costs for COVID-19 testing with governments taking their cut on top of that with taxes. Everyone must be aligned in understanding that increased travel costs will mean a slower economic recovery. Cost reduction efforts on all sides are needed.”
Go to www.iata.org for more.
