COVID-19

Outlook for air

transport and the airline
industry
Brian Pearce
Chief Economist
24th November 2020
1
COVID-19 is the biggest shock to hit aviation since WW2
Global RPKs estimated to have shrunk an average of 66% in 2020
Worldwide passengers kilometers flown (RPKs) annually
10,000
9,000
8,000
7,000
6,000
Billions

5,000
4,000
GFC
3,000
2,000 9-11 COVID-19
1,000
0
1950 1960 1970 1980 1990 2000 2010 2020

Source: IATA Economics using data from IATA Statistics and Refinitiv Datastream
 Government aid has kept airlines on life support
USD173 Bn of aid from governments worldwide so far
Government aid made available to airlines due to COVID-19, by type (USD bn)
Reimbursable / deferral only
Non-reimbursable / waiver/ discount

Loans 58

Wage subsidies 46

Loan guarantees 24
Cash injections,
23
equity financing
Corporate taxes 12

Ticket taxes 10

Fuel taxes 1

Total 173

Source: IATA Economics analysis using public information and data from SRS Analyser, DDS, FlightRadar 24, TTBS, ACIC,
Platts, Airline Analyst, annual reports. Includes relief measures up to 13 Nov 2020.
 Airlines have also raised cash from capital markets
Government aid + capital markets added more than USD220bn to debt

Banks, capital markets, lessors

Government

Source: IATA Economics using data from own estimates of Government aid, private debt estimates from Airfinance Journal,
November 2020. Debt includes adjustment for operating leases.
 Air travel recovery stalling but global economy stronger
Recovering global economy boosting air cargo but not air travel
Growth in the global economy, passenger and cargo km flown
20%
Global industrial
production
0%
% change year-on-year

-20% Global cargo km

flown
-40%

-60% Global passenger km

flown
-80%

-100%
Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20

Source: IATA Economics using data from IATA Statistics and Refinitiv Datastream
When lock-downs end business confidence rebounds
Wider economy revival encouraging for air cargo but not helping travel
Business confidence in manufacturing and services (PMI)
70

EXPANSION China US
60
Net responses, 50=no change

50

Eurozone
40
CONTRACTION

30

20

10
Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20
Source: IATA Economics using data from Markit
Domestic air travel reviving but not in all markets
China and Russia fully recovered, but limited progress in US & Australia
Growth in passenger km flown on domestic markets
40%

20% Russia
2.7%
0%
% change year-on-year

-2.8%
-20%
China
-40%

-60% US
-65%
-80%
-89.3%
-100% Australia

-120%
Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20

Source: IATA Economics using data from IATA Statistics

2nd waves hitting air travel in many developed markets
Large rise in COVID cases in Europe leading to renewed lock-downs
New COVID19 cases per day, 7-day moving average
260000 Europe
New COVID19 cases per day, 7-day moving

240000
220000
200000
180000
160000
average

140000 Rest of
120000 world
100000
US
80000
60000
40000
20000
China
0
15-Feb 15-Mar 15-Apr 15-May 15-Jun 15-Jul 15-Aug 15-Sep 15-Oct

Source: IATA Economics using data from ECDC

2nd wave caused reverse in Europe international revival
Central-N America market rising but <10% of within-Europe market
Growth in passenger km flown, international markets
20%
% change year-on-year, segment basis

0%

-20%

-40%

-60% Within Europe

-80%
N-C America
-100%

-120%
Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20

Source: IATA Economics using data from IATA Statistics

 Latin America shows entry with testing can boost travel
October booking significantly higher if testing rather than quarantine
% change year-on-year in net bookings, 1-15 Oct 2020 vs. 2019
Closed to foreigners Entry with quarantine Entry with test Open

-59% -57%

-70% -69% -68% -67%

-75%
-78%
-81% -81%
-85% -85%
-92%
-98% -98% -98% -97%
Argentina Suriname Paraguay Venezuela Uruguay Chile Panama Peru Costa Nicaragua ColombiaGuatemala Brazil Caribbean Ecuador Honduras Mexico
Rica

Source: IATA Economics using data from DDS

Vaccine news positive but recovery will still take time
Issues with vaccine implementation and the impact of economic damage
Global RPKs departures, trillions per year Pre-COVID19 baseline
12 forecast

New
10 baseline
forecast
Global RPKs, trillions per year

Range of
8 uncertainty

2019 level
2 recovered by
2024

0
2010 2012 2014 2016 2018 2020 2022 2024
Source: IATA/Tourism Economics ‘Air Passenger Forecasts’ October 2020
 Costs need to be downsized to match lower revenues
Revenues in 2021 are estimated to be ~50% of pre-crisis expectations
Airline industry revenues, USD billion Pre-COVID-19
1,000 forecast
900

800

700

600
USD billion

500 -50%

400 Passenger revenues

300

200

100
Cargo revenues
0
2016 2017 2018 2019 2020 2021

Source: IATA Economics

 Asia-Pacific turns around 1st then developed markets
China’s airlines turn cash +ve now, vaccine distribution uneven at first
EBIT margins, region of airline registration
N America Europe Asia Pacific L America Africa Middle East
20%

10%
% of operating revenues

0%

-10%

-20%

-30%

-40%

-50%
2015-19 2020 2021

Source: IATA Economics

 Losses forecast to be reduced to USD38bn in 2021
That’s after an estimated USD118bn in 2020 but still exceeds GFC loss
Net profit EBIT margin
60 15

40 10

20 5

% of operating revenues
0 0

-20 -5
USD billion

-40 -10

-60 -15

-80 -20

-100 -25

-120 -30

-140 -35
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: IATA Economics
Airline industry may turn cash positive in late 2021
Vaccine boost to revenues likely in H2 2021 but challenging first half
Airline industry quarterly cash burn forecast
10

-10
USD billion

-20

-30

-40

-50

-60
2020Q2 2020Q3 2020Q4 2021Q1 2021Q2 2021Q3 2021Q4
Source: IATA Economics
 Some airlines may run out of cash before vaccine boost
Median airline’s cash lasts 8.5 months (end Q1) at 2020H2 cash burn
2020 end June cash+cash equivalents/2020 H2 monthly cash burn

25

20
Months

15

Median airline
10
8.5 months of cash

0
1 2 3 4 5 6 7 8 9
Individual airlines
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

Source: IATA Economics using data from the Airline Analyst

Contacts
economics@iata.org
www.iata.org/economics