Airlines facing 'worst year in history' with €75bn in losses

Airlines are expected to lose a combined $84.3bn (€75bn) this year and suffer a 50% fall in revenues in what is being described as the worst year in history for the air travel industry.
Airlines facing 'worst year in history' with €75bn in losses

Cathay Pacific is the latest airline to tap a government bailout. AP Photo/Kin Cheung
Cathay Pacific is the latest airline to tap a government bailout. AP Photo/Kin Cheung

Airlines are expected to lose a combined $84.3bn (€75bn) this year and suffer a 50% fall in revenues in what is being described as the worst year in history for the air travel industry.

Industry representative body the International Air Transport Association – IATA – said it expects airline revenues to fall from $838bn to $419bn this year, as the Covid-induced shut-down gives way to a gradual and partial resumption of services. Furthermore, it only sees a gradual recovery next year, with losses falling to just under $16bn, but with revenues rising to nearly $600bn.

“Financially, 2020 will go down as the worst year in the history of aviation. On average, every day of this year will add $230m to industry losses,” said IATA chief executive Alexandre de Juniac.

“In total, that’s a loss of $84.3bn. It means that—based on an estimate of 2.2 billion passengers this year—airlines will lose $37.54 per passenger. That’s why government financial relief was and remains crucial as airlines burn through cash,” he said.

Passenger capacity will decline by over 40% this year and passenger numbers will halve to around 2.25 billion people, a level last seen in 2006. As a result, passenger revenues are expected to fall from $612bn to $241bn.

All regions will be heavily hit. Regards Europe, IATA sees passenger demand falling by 56% this year and European airlines seeing a $21bn drop in net profits. However, the group said the removal of controversial national quarantine laws could boost European aviation’s situation.

However, Mr Juniac said the worst of the collapse in business is probably over provided there is not a second and more damaging wave of Covid-19.

"A key to the recovery is universal implementation of the re-start measures agreed through the International Civil Aviation Organization (ICAO) to keep passengers and crew safe," he said.

"And, with the help of effective contact tracing, these measures should give governments the confidence to open borders without 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. Getting people safely flying again will be a powerful economic boost,” he said.

Meanwhile, Cathay Pacific is the latest airline to tap a government bailout; Hong Kong leading a $5bn rescue.

Around the world, states have been bailing out airlines and in some cases, such as Germany’s Lufthansa, taking direct equity stakes to keep them flying.

“The alternative would have been a collapse of the company. Commercial debt markets are effectively closed to airlines today who do not have extensive government shareholder support,” Cathay chairman Patrick Healy said.

Cathay has grounded most of its planes, flying only cargo and a skeleton passenger network to major destinations such as Beijing, Los Angeles, Sydney and Tokyo.

-additional reporting Reuters

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