The air transport industry is bracing for a catastrophic year, as airlines expect to lose more than $84 billion in revenue, as a result of the coronavirus pandemic.
Airlines are expected to have a net profit margin of minus-20.1% this year, and revenues should fall by about half to $419 billion from $838 billion in 2019.
The grim prediction comes from the International Air Transport Association, an industry group that represents nearly 300 airlines comprising 82% of global air traffic.
“Financially, 2020 will go down as the worst year in the history of aviation,” Alexandre de Juniac, the association’s director general and CEO said Thursday in a statement shared with the press.
“On average, every day of this year will add $230 million to industry losses. In total that’s a loss of $84.3 billion,” he added. “That’s why government financial relief was and remains crucial as airlines burn through cash.”
The trend continues the following year, in a slightly less dramatic way: losses are expected to be around $15.8 billion and revenues should rise to $598 billion.
The disastrous financial outlook is mainly driven by an unprecedented drop in passenger demand. According to the International Air Transport Association, during the worst of the pandemic, in April, global air travel was roughly 95% below 2019 levels.
Fuel prices offered the industry some relief, as the forecast average for jet fuel in 2020 is expected to be $36.8/barrel (15% of overall cost) compared to $77/barrel in 2019 (23.7% of overall cost. )
Another source of positive news came from cargo transport: revenues are set to reach a near-record $110.8 billion in 2020 (up from $102.4 billion in 2019). In 2019, cargo contributed to 12% if the industry revenue. In 2020, it’s expected to contribute approximately 26%.
Looking back to the troubling first semester of the year, de Juniac hopes that the worst could possibly be over — and it’s now time for airlines to prepare for the recovery phase.
“Provided there is not a second and more damaging wave of COVID-19, the worst of the collapse in traffic is likely behind us,” he said, adding that safety of customers and employees will be crucial for a robust rebirth.
“A key to the recovery is universal implementation of the restart measures agreed through the International Civil Aviation Organization to keep passengers and crew safe,” he said.
A successful implementation of such plans, used in conjunction with effective contact tracing, should give governments enough confidence to open their borders, and to allow travelers to arrive in foreign countries, without having to undergo quarantine measures.
“That’s an important part of the economic recovery because about 10% of the world’s GDP is from tourism and much of that depends on air travel,” he said. “Getting people safely flying again will be a powerful economic boost.”
People will want to fly again if they are confident in their personal financial situation, and in measures implemented to keep them safe, he said. If airlines and governments follow the International Air Transport Association’s recommendations, customers will be reassured about their safety — which de Juniac calls a “good start.”