Airline revenue only likely to reach 43% of pre-pandemic levels this year

Carriers’ combined debt rose by $220bn last year to $651bn by year end, Iata says

The airline industry’s debt ballooned to $651bn last year, the International Air Transport Association said on Wednesday as carriers tapped governments and debt markets. Air Canada finalised a $4.7bn Show more

The airline industry’s revenues are expected to take longer to recover from the impact of the Covid-19 pandemic than previously envisaged, according to the International Air Transport Association.

Industry revenue this year is only likely to recover to 43 per cent of 2019 levels, compared with a previous forecast in December of 55 per cent, the organisation said in a media briefing on Wednesday.

This is a result of “the delays in vaccination roll-out in some countries and secondly the deterioration we are seeing today in the virus control situation”, Brian Pearce, Iata’s chief economist, said.

The travel restrictions that remain in place in many countries mean that a return to break-even for the industry is no longer likely this year. Airlines are forecast to make a loss of $47.7bn this year, although this is a 62 per cent reduction on the $126.4bn lost last year.

“Airlines are making progress, but we think we’re going to have to wait until 2022 for the industry to get back to break even, or profitability,” Mr Pearce said.

The industry is likely to burn through about $81bn of cash in 2021, on top of about $149bn last year. Government measures have helped and airlines have taken drastic steps to reduce overheads.

“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 $220bn to $651bn,” Iata’s director general Willie Walsh said.

Domestic travel revenue is likely to make a near-full recovery in the second half of this year to 96 per cent of 2019 levels, backed by strong growth in China and the US.

The US and UK are both expected to vaccinate 75 per cent of their populations by July but continental Europe will not reach this level until October. Some major emerging markets such as Brazil and China will reach this level only by mid-next year.

International passenger revenue is therefore only likely to be 34 per cent of 2019 levels during the second half, according to Iata.

“The key summer flying period is clearly at risk,” Mr Pearce said. “We have made the assumption that some markets will open but others will not. We will not see a widespread lowering of barriers until next year.”