Global airline industry is expected to suffer $47.7 billion net loss in 2021 as the health crisis and travel restrictions drag on
Despite an estimated 2.4 billion people travelling in 2021, airlines will burn through a further $81 billion of cash
With demand growth forecast at 13.1%, the cargo business will go into positive territory this year after a full-year decline of 9.1% in volumes last year
In 2021 cargo will account for a third of industry revenues, significantly above cargo’s historic contribution of 10% to 15% of total revenues
Cargo revenues are expected to reach a historic high of $152 billion this year
Global air cargo demand in 2021 is expected to grow by 13.1% over 2020 and to produce revenues of US$152 billion, a historic high, according to a new forecast from the International Air Transport Association (IATA).
However, the strong outlook for cargo contrasts sharply with that for the passenger business and is not enough to lift the dismal total industry forecast for this year.
IATA, in an April 21 update to its financial outlook, said the global airline industry is expected to suffer a net loss of $47.7 billion in 2021 as the health crisis drags on and government-imposed restrictions hinder international travel recovery.
It said this represents a net profit margin of -10.4%, an improvement on the estimated net industry loss of $126.4 billion in 2020, equivalent to a net profit margin of -33.9%.
“This crisis is longer and deeper than anyone could have expected. Losses will be reduced from 2020, but the pain of the crisis increases,” said Willie Walsh, IATA’s director general.
“Government imposed travel restrictions 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.”
Recovery for cargo, none for travel
Cargo has outperformed the passenger business throughout the crisis, a trend expected to continue throughout 2021, said the report.
With demand growth forecast at 13.1% over 2020, the cargo business will go into positive territory compared to pre-crisis levels after registering a volume decline of 9.1% in 2020 compared to 2019.
Total cargo volumes are expected to reach 63.1 million tonnes in 2021, nearly at the pre-crisis peak of 63.5 million tonnes which occurred in 2018.
In contrast, the passenger business is languishing as “travel restrictions, including quarantines, have killed demand,” said the report.
IATA estimates that travel will recover to 43% of 2019 levels over the year, a 26% improvement on 2020, but far from a recovery. Domestic markets will improve faster than international travel. Overall passenger numbers are expected to reach 2.4 billion in 2021, an improvement on the nearly 1.8 billion who travelled in 2020, but well below the 2019 peak of 4.5 billion.
International passenger traffic remained 86.6% down on pre-crisis levels over the first two months of 2021. Vaccination progress in developed countries, particularly the US and Europe, is expected to combine with widespread testing capacity to enable a return to some international travel at scale in the second half of the year, reaching 34% of 2019 demand levels.
“2021 and 2020 have opposite demand patterns: 2020 started strong and ended weak, while 2021 is starting weak and is expected to strengthen towards year-end. The result will be zero international growth when comparing the two years,” IATA said.
Revenue, capacity outlooks
Total industry revenues are expected to hit $458 billion, just 55% of the $838 billion generated in 2019 but a 23% growth from the $372 billion generated in 2020.
Passenger revenues are expected to total $231 billion, up from $189 billion in 2020, but far below the $607 billion generated in 2019.
Cargo revenues are expected to reach $152 billion, a historic high. This is up from $128 billion in 2020 and $101 billion in 2019.
IATA said cargo capacity remains constrained owing to the large-scale grounding of the passenger fleet. This removed significant belly capacity, driving up yields 40% in 2020, with a further 5% growth expected in 2021.
“In 2021 cargo will account for a third of industry revenues. This is significantly above cargo’s historic contribution, which ranged around 10-15% of total revenues. The improvement in cargo, however, is not able to offset the dramatic decline in passenger revenues.”
Total airline capacity, meanwhile, is likely to return at a slower pace than demand, reflecting the pressure on airlines from debt and fuel prices to operate only cash flow-positive services.
Taking cargo and passenger traffic into account, the overall weighted load factor is forecast to rise a little to 60.3% in 2021. This is considerably below the 66% IATA estimates to be breakeven for profitability in 2021.
Significant differences are emerging between regions with large domestic markets and those relying primarily on international traffic, noted IATA.
Losses are highest in Europe (-$22.2 billion) with only 11% of its passenger traffic being domestic. Proportionately, losses are much smaller in North America (-$5.0 billion) and Asia-Pacific (-$10.5 billion) where domestic markets are larger (66% and 45% respectively, pre-crisis).
The outlook points to the start of industry recovery in the latter part of 2021 as IATA called for governments to have plans in place so that no time is lost in restarting the sector when borders are finally reopened.
“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,” Walsh said.