IATA: Airline industry to make $118bn loss in 2020

Kumutha Ramanathan
·Contributor
·2-min read
Airline industry will see a slow and prolonged recovery, according to a report. Photo: Reuters
Airline industry will see a slow and prolonged recovery, according to a report. Photo: Reuters

The airline industry is set to incur a $118bn (£87bn) net loss in 2020, but the tide will be stemmed in 2021 with losses still hitting $38bn, the International Air Transport Association (IATA) said on Tuesday.

IATA said the availability of a coronavirus vaccine in the second half of the year is “anticipated to be a turning point,” but the recovery will be gradual since phased distribution will take time.

“We expect the share of world GDP spent on air transport to be 50% in 2021, half of the pre-crisis levels,” said IATA.

“A number of airlines have substantial cash reserves to survive until revenues rise strongly late next year. But many airlines do not.”

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In Europe alone, many travel-related companies have had to make major changes just to survive, including British Airways owner IAG (IAG.L) cutting 10,000 jobs and engine maker Rolls Royce (RR.L) planning to cut at least 1,400.

The news comes as a number of airline stocks on Tuesday saw shares momentarily surge as the market became more optimistic about the introduction of a COVID-19 vaccine and the official transition of president-elect Joe Biden in the US.

Travel and leisure stocks further benefited from news that the UK government confirmed an easing of travel quarantine rules and lockdown restrictions in England.

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IAG (IAG.L) was up 1.9% at around 3.30pm in London and Rolls Royce (RR.L) gained 6.2%, both stocks hitting one week highs on Tuesday as they were swept up in the wider market enthusiasm.

Rolls Royce shared surged to over 6% on Tuesday as markets became increasingly optimistic about future air travel. Chart: Yahoo Finance
Rolls Royce shared surged to over 6% on Tuesday as markets became increasingly optimistic about future air travel. Chart: Yahoo Finance

While the road to recovery is long, IATA said the story is not uniform across the world, there are regional variations. This includes North America, the strongest performer in the pre-crisis period, seeing an estimated loss of $48.5bn in 2020, though its 2021 recovery is expected to be “prompt” compared with other regions, with the net profit margin improving to -6.8% from -41.4% in 2020.

Europe was also described as having a more “gradual” recovery due to a slower economic rebound, with net losses forecast to be $11.9bn, which corresponds to 12% of forecast revenues, said IATA.

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