(05 Oct 2021)
IATA published its latest outlook for airline industry
financial performance at its AGM in Boston on Monday.

Highlights include:

– Net industry losses are expected to reduce to
$11.6 billion in 2022 after a $51.8 billion loss in 2021 (worsened
from the $47.7 billion loss estimated in April). Net 2020 loss
estimates have been revised to $137.7 billion (from $126.4
billion). Adding these up, total industry losses in 2020-2022 are
expected to reach $201 billion.

– Demand (RPKs) is expected to stand at 40% of
2019 levels for 2021, rising to 61% in 2022.

– Total passenger numbers are expected to reach
2.3 billion in 2021. This will grow to 3.4 billion in 2022 which
is similar to 2014 levels and significantly below the 4.5 billion
travelers of 2019.

– Robust demand for air cargo is expected to
continue with 2021 demand at 7.9% above 2019 levels, growing to
13.2% above 2019 levels for 2022.

“The magnitude of the COVID19 crisis for airlines
is enormous. Over the 2020-2022 period total losses could top $200
billion,” said Willie Walsh, IATA’s Director General. “To survive
airlines have dramatically cut costs and adapted their business to
whatever opportunities were available. That will see the $137.7
billion loss of 2020 reduce to $52 billion this year. And that
will further reduce to $12 billion in 2022. We are well past the
deepest point of the crisis. While serious issues remain, the path
to recovery is coming into view. Aviation is demonstrating its
resilience yet again.”

The air cargo business is performing well, and
domestic travel will near pre-crisis levels in 2022. The challenge
is international markets which remain severely depressed as
government-imposed restrictions continue.

“People have not
lost their desire to travel as we see in solid domestic market
resilience. But they are being held back from international travel
by restrictions, uncertainty and complexity,” Walsh said. “More governments are
seeing vaccinations as a way out of this crisis. We fully agree
that vaccinated people should not have their freedom of movement
limited in any way. In fact, the freedom to travel is a good
incentive for more people to be vaccinated. Governments must work
together and do everything in their power to ensure that vaccines
are available to anybody who wants them.”

Re-establishing global connectivity, the 11.3 million jobs
(pre-COVID19) in the aviation industry, and the $3.5 trillion of
GDP associated with travel and tourism should be priorities for
governments.

“Aviation is resilient and
resourceful, but the scale of this crisis needs solutions that
only governments can provide. Financial support was a lifeline for
many airlines during the crisis. Much of that—approximately $110
billion— is in the form of support that needs to be paid back. Combined with commercial borrowing the industry is now highly
leveraged. We don’t want handouts, but wage support measures to
retain critical skills may be necessary for some airlines until
governments enable international travel at scale. And regulatory
alleviations—like continued slot wavers while international
traffic recovers—will be needed well into 2022,” said Walsh.

Outlook Drivers

Global demand,
measured in RPKs, is recovering steadily.

– In 2021
overall demand is expected to reach 40% of pre-crisis (2019)
levels. Capacity is expected to increase faster than demand
growth, reaching 50% of pre-crisis levels for 2021. The average
passenger load factor in 2021 is expected to be just 67.1%, a
level not seen since 1994.

– In 2022 overall demand is expected
to reach 61% of pre-crisis (2019) levels. Capacity is expected to
continue to increase faster than demand, reaching 67% of
pre-crisis levels for 2022. Average passenger load factors are
expected to recover to 75.1%, a level exceeded in every year since
2005 until this crisis hit, and far below the 82.6% record set in
2019.

Domestic demand, with fewer restrictions in
most countries, is driving the recovery. Global GDP is expected to
grow by 5.8% in 2021 and a further 4.1% in 2022. Additionally,
accumulated consumer savings (worth 10-20% of GDP in some
countries) is supporting the alleviation of pent-up demand in
unrestricted domestic markets.

– In 2021 domestic demand
is expected to reach 73% of pre-crisis (2019) levels.

– In
2022 domestic demand is expected to reach 93% of pre-crisis (2019)
levels.

International demand is the slowest to
recover owing to continuing restrictions on the freedom of
movement across borders, quarantine measures and traveler
uncertainty.

– In 2021 international demand is expected to
reach 22% of pre-crisis (2019) levels.

– In 2022 international
demand is expected to reach 44% of pre-crisis (2019) levels.

Cargo demand (measured in CTK) is strong as companies
continue to re-stock. The World Trade Organization forecasts world
trade to grow at 9.5% in 2021 and 5.6% in 2022.

– In 2021
cargo demand is expected to exceed pre-crisis (2019) levels by 8%.

– In 2022 cargo demand is expected to exceed pre-crisis (2019)
levels by 13%.

Revenue and Yield

Overall
revenues in 2021 are expected to grow by 26.7% compared to 2020 to
$472 billion (similar to 2009 levels). Further growth of 39.3% in
2022 will see industry revenues rise to $658 billion (similar to
2011 levels).

– The passenger business will contribute
$227 billion to industry revenues in 2021, rising to $378 billion
in 2022. Passenger yields declined each year between 2012 and
2020. In 2021 yields are expected to grow by 2.0% and a further
10% in 2022.

– Cargo revenues are expected to rise to a record
$175 billion in 2021 with a similar $169 billion expected in 2022.
Cargo yields are expected to grow by 15% in 2021 but decline by 8%
in 2022.

Costs

Airlines achieved aggressive
cost reductions having reduced overall expenses by 34% in 2021
compared to 2019. Costs, however, will rise in 2022 and will be
only 15% lower compared with pre-crisis levels with expanded
operations and higher fuel prices.

– The price of jet
kerosene was the only respite for airlines in 2020. It fell to
$46.6/barrel in 2020 from $77/barrel in 2019. Kerosene prices
increased to an average of $74.5/barrel in 2021 and are expected
to rise further to $77.8/barrel in 2022.

– Non-fuel unit costs
rose 19% in 2020 compared to 2019, as fixed costs had to be spread
over a dramatically smaller capacity base. This will partially
reverse in 2021 with an 8% reduction from 2020 levels. Capacity
growth will spread fixed costs more broadly while cost cutting
efforts continue. In 2022, we expect a 2% increase.

Vaccinations

Vaccinations are proving to be a key
driver for government relaxation of border control measures. Quick
progress, with some exceptions, of vaccine distribution in
developed economies is progressively giving governments the
confidence to re-open borders and people the confidence to travel.
Parts of the world with slower vaccine distribution (developing
economies and some developed economies in Asia Pacific) will take
longer to see an industry recovery.

Regional
Aviation Performance

All regions will improve their collective
financial performance compared to 2020. The strongest performing
region is North America which is expected to see a $5.5 billion
loss in 2021 transform to a $9.9 billion profit in 2022. All other
regions will see reduced losses in 2022 compared to 2021.

Asia-Pacific carriers are
expected to see losses diminish from $11.2 billion in 2021 to $2.4
billion in 2022. The region continues to suffer some of the most
draconian travel restrictions. While there has been some
alleviation in restrictions, significant improvements in
international markets are not expected until later in 2022.
Reduced losses are expected to be achieved on the back of large
and largely open domestic markets, not least of which is China.
The region’s carriers are also benefitting disproportionally from
the strength of air cargo markets in which they are dominant.

North American carriers are expected to outperform other regions
on the back of fast recovery of the US domestic market. The
opening of the US market to vaccinated travelers from November
2021 will progress the recovery to international markets. The US
industry started to turn cash-positive in the second quarter of
2021 and will be the only region in positive financial territory
in 2022 with an expected $9.9 billion profit.

 European
carriers will see their losses cut from $20.9 billion in 2021 to
$9.2 billion in 2022. Shifting rules and confused application of
EC recommendations across Europe compromised the expected positive
impact of rising vaccination rates and establishment of the
European Digital Covid Certificate. Better coordination between
governments is expected to see a broader opening of international
markets in the months ahead, boosted significantly by the
re-establishment of transatlantic travel for vaccinated travelers.
Long-haul demand, however, will significantly lag behind the
recovery in intra-European travel.

Latin American carriers will see losses cut from $5.6 billion
this year to $3.7 billion in 2022. Most of the region’s markets
are open, but with some notable exceptions (Argentina for
example). The strength of the US-Latin American market will be a
major contributing factor to improvement. Significant
restructuring costs as the regions carriers adjust to the new
business realities will weigh on financial performance, keeping
the region in a collective loss.

Middle Eastern carriers
will see very limited improvement in their financial performance
from a $6.8 billion loss in 2021 to a $4.6 billion loss in 2022.
Without large domestic markets, the region’s major carriers rely
significantly on connecting traffic, especially to Asia-Pacific
which has been slow to re-open to international traffic.

African carriers will see a very slow pace of recovery in
financial performance from a $1.9 billion loss in 2021 to a $1.5
billion loss in 2022. Low vaccination rates across the continent
are expected to severely dampen demand throughout 2022. The slight
improvement is built on the expectation of some recovery in
intra-Africa travel and travel to some tourist destination with
relatively higher vaccination rates.

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