March 3, 2021 aviation

Crisis deepens for airlines in January

The International Air Transport Association (Iata) has said that the crisis deepened for airlines in January, as international traffic plunged 85.6 per cent in the month compared to pre-crisis levels, and domestic air traffic was down 47 per cent.

“New variants of the coronavirus forced governments to tighten travel restrictions across the world, hurting the outlook for airlines,” global airline body warned during a virtual event on Tuesday.

“That is what drove the weakness and the low points in January. Airlines are facing a really tough start to the year,” said Iata chief economist Brian Pearce.

The Iata further said passenger traffic in terms of revenue passenger per kilometres plunged 72 per cent year-over-year basis in January compared to the same month in 2019. “We’ll probably see another set of weak numbers before it gets better. It’s a challenging time for the airlines,” said Pearce.

Middle Eastern airlines saw demand plunge 82.3 per cent in January compared to January 2019, which was broadly unchanged from an 82.6 per cent demand drop in December versus a year ago. Capacity fell 67.6 per cent, and load factor declined 33.9 percentage points to 40.8 per cent.

“2021 is starting off worse than 2020 ended and that is saying a lot. Even as vaccination programs gather pace, new Covid variants are leading governments to increase travel restrictions,” said Alexandre de Juniac, Iata’s director-general and CEO.

He said the uncertainty around how long these restrictions will last also has an impact on future travel. “Forward bookings in February this year for the Northern Hemisphere summer travel season were 78 per cent below levels in February 2019,” he said.

Industry to remain cash negative

Latest analysis by Iata indicated that the airline industry is expected to remain cash negative throughout this year as estimates for cash burn in 2021 have ballooned to the $75 billion to $95 billion range from a previously anticipated $48 billion in November 2020. It said airlines are now not expected to be cash positive until 2022.

“With governments having tightening border restrictions, 2021 is shaping up to be a much tougher year than previously expected,” said Alexandre de Juniac.

“Our best-case scenario sees airlines burning through $75 billion in cash this year. And it could be as bad as $95 billion. More emergency relief from governments will be needed,” he said.

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

Air cargo recovers

Meanwhile, Iata’s January 2021 data for global air cargo markets shows that air cargo demand returned to pre-Covid levels (January 2019) for the first time since the onset of the crisis.

Global demand, measured in cargo tonne-kilometres, was up 1.1 per cent compared to January 2019 and three per cent compared to December 2020. All regions saw month-on-month improvement in air cargo demand, and North America and Africa were the strongest performers, according to Iata.

“Air cargo traffic is back to pre-crisis levels and that is some much-needed good news for the global economy,” said Alexandre de Juniac.

Middle Eastern carriers posted a six per cent rise in international cargo volumes in January versus January 2019, which was an acceleration over the 2.4 per cent year-on-year gain recorded in December compared to December 2019, according to Iata.


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