Aviation industry to stay cash negative in 2021: Global body

The aviation industry is likely to remain cash negative throughout 2021 due to the fall in the travel demand amid restrictions imposed by nations on the account of the COVID-19 pandemic, according to the International Air Transport Association (IATA).

In a statement, the aviation body said that estimates for cash burn in 2021 have ballooned to the $75 billion-$95 billion range from a previously anticipated $48 billion.

It said that its previous analysis, conducted in November 2020, had indicated that airlines would turn cash positive in the fourth quarter of 2021. However, it said that at the industry level, airlines are now not expected to be cash positive until 2022.

“It is already clear that the first half of 2021 will be worse than earlier anticipated. This is because governments have tightened travel restrictions in response to new COVID-19 variants. Forward bookings for summer (July-August) are currently 78% below levels in February 2019 (comparisons to 2020 are distorted owing to COVID-19 impacts),” it said.

The IATA said it is vital that governments and the industry are fully prepared to restart the moment governments agree that it is safe to re-open borders.

It said that an optimistic scenario would see travel restrictions gradually lifted once the vulnerable populations in developed economies have been vaccinated, but only in time to facilitate tepid demand over the peak summer travel season in the northern hemisphere.

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“In this case, 2021 demand would be 38% of 2019 levels. Airlines would burn through $75 billion of cash over the year. But cash burn of $7 billion in the fourth quarter would be significantly improved from an anticipated $33 billion cash burn in the first quarter,” it said.

In a pessimistic scenario, it would see airlines burn through $95 billion over the year, said the IATA. It said there would be an improving trend from a $33 billion cash burn in the first quarter reducing to $16 billion in the fourth quarter.

The aviation body expects a loss of over $38.7 billion for airlines across the world in 2021 due to the fall in travel demand amid pandemic curbs. Reports suggest India and countries in the Asia-Pacific region had likely incurred combined losses worth $7.5 billion in 2020.

Though the IATA is expecting an improved performance in the second half of 2021, it may take at least 2024 for the passenger traffic to return to the 2019 levels.

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Alexandre de Juniac, IATA’s Director General and CEO, said that with governments having tightening border restrictions, 2021 is shaping up to be a much tougher year than it was 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,” he said.

De Juniac said more emergency relief will be needed from the governments. “A functioning airline industry can eventually energize the economic recovery from COVID-19. But that won’t happen if there are massive failures before the crisis ends,” added the IATA CEO.

“If governments are unable to open their borders, we will need them to open their wallets with financial relief to keep airlines viable,” he said.