The global airline industry is expected to remain cash negative throughout 2021, the International Air Transport Association (IATA) said on Wednesday (Feb. 24), releasing its latest analysis.
Previous analysis (November 2020) indicated that airlines would turn cash positive in the fourth quarter of 2021.
But at the industry level, airlines are now not expected to be cash positive until 2022.
Estimates for cash burn in 2021 have ballooned to the $75 billion to $95 billion range from a previously anticipated $48 billion, IATA said.
“With governments having tightening border restrictions, 2021 is shaping up to be a much tougher year than previously expected,” stated Alexandre de Juniac, IATA’s Director General and CEO. “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, de Juniac 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,” he said.
Time to prepare
IATA attributes many factors to 2021’s weak start, including the tightening of travel restrictions in response to new COVID-19 variants.
An optimistic outlook, it said, 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.”
“With airlines now expected to burn cash throughout 2021 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,” IATA said.
3 critical initiatives
Three “critical” initiatives IATA is outlining includes planning (preparing the industry to safely restart) health credentials (IATA’s Travel Pass, for example, will soon enable travellers to control their health data and share it with relevant authorities) and global standards (for recording tests and vaccines).
de Juniac praised the United Kingdom for setting a good example as it, earlier this week, laid out a structure for re-opening based on an improvement in the COVID-19 situation.
“This gives airlines a framework to plan the restart, even if it needs to be adjusted along the way. Other governments should take note as a best practice for working with industry,” said de Juniac.
In regards to the IATA Travel Pass, several airlines—including Air New Zealand, Copa Airlines, Etihad Airways, Emirates, Qatar Airways, Malaysia Airlines, RwandAir, and Singapore Airlines—have done or are committed to doing trials.
“The IATA Travel App will help to set the bar very high for managing health credentials, protecting against fraud and enabling a convenient travel process,” said de Juniac. “While there is choice in the market for solutions, there should be no compromise on the fundamentals, or we risk failing systems, disappointed governments and travelers, and a delayed restart.”
Fraudulent COVID-19 test results are already proving to be an issue, he added, which is why implementing standards is key.
“Even as governments focus on managing the COVID-19 crisis, we must be thinking a step ahead to the plans, tools and standards needed to restart flying and energize the economic recovery from COVID-19,” said de Juniac.
But with good news on vaccines and growing testing capacity, “there is a glimmer of light at the end of the tunnel,” he added.
“So, it’s the time to ask governments for their restart plan and to offer any support from industry that could help.”
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