The International Air Transport Association (IATA) forecasts that airlines globally are expected to lose $84.3 billion in 2020 due to the COVID-19 pandemic that has seen a dip in the aviation industry revenues.
The association projects that revenue will likely fall 50% to $419 billion, down from $838 billion last year, with a net profit margin of -20.1%.
According to the association’s Director-General, Alexandre de Juniac, every day of this year adds $230 million to industry losses. This averages to almost $38 per passenger flown, based on an estimate of 2.2 billion passengers.
The anticipated decline in passenger revenue this year has widened to $371 billion, up from the $314 billion forecast in April. The drop, including non-passenger sales, may be $419 billion. Passenger numbers are seen falling to 2.25 billion this year before rising to 3.38 billion in 2021, still more than 25% below 2019 levels.
Yields, a proxy for fares, are seen falling 18% this year, contributing to a $241 billion decline in passenger revenue.
Although IATA says that revenue will rise to $598 billion in 2021, it further warns that losses could hit $16 billion as traffic struggles to recover and airlines slash fares to win business.
Industry debt has jumped by about $120 billion, with airlines set to end the year with about $550 billion in total debt. This means the sector’s borrowings will be 16 times earnings next year, stretching from 4.6 times in 2019.
Earlier in March this year, the International Air Transport Association (IATA) reported that airlines worldwide would need $200 billion (KSh20.8 trillion) capital injection to remain afloat in this COVID-19 pandemic. At the time, 75% of the airlines only had cash to cover three months of their fixed expenses.