The head of the International Air Transport Association (IATA) on October 2 expressed confidence that the worst of the crisis has passed, and projected that airlines globally will reduce their joint net loss to $11.6 billion in 2022, from $51.8 billion this year. North American airlines are expected to end 2022 with a $9.9 billion profit, which would represent a significant turnaround from a projected $5.5 billion loss in 2021.
According to the industry group, which is holding its annual general meeting in Boston this week, the recovery will mainly be due to strong demand for domestic flights in the U.S. and North America will be the only region in positive financial territory next year. “We are well past the deepest point of the crisis,” IATA general director Willie Walsh said.
“The path to recovery is coming into view. Aviation is demonstrating its resilience yet again,” he added, while stressing that “serious issues remain.”
These issues include the weak recovery of international demand and the high level of debt amassed by airlines companies to survive during the pandemic. “Financial support was a lifeline for many airlines during the crisis. Much of that—approximately $110 billion— is in the form of support that needs to be paid back.
Combined with commercial borrowing the industry is now highly leveraged,” Walsh noted. Airlines don’t want handouts, he claimed, but said that wage support measures “to retain critical skills” may be necessary for some airlines until governments enable international travel at scale. He also argued for a continuation of slot wavers “well into 2022.”
He said that he would consider it normal that airlines would hand back slots if they chose not to fly. But, he said, “they want to fly; they are prevented from flying [by government-imposed restriction] so their slots should not be put at risk,” he maintained. He slammed the continuing restrictions, uncertainty and complexity of cross-border travel, saying that “losses remain to be dictated by government travel restrictions, not by the virus.”
International demand, measured in revenue passenger kilometer, is expected to reach only 22 percent of 2019 pre-crisis levels and a paltry 44 percent of pre-crisis levels next year. In contrast, IATA projects domestic demand recover to 73 percent of 2019 levels this year, and to 93 percent next year.
Overall, IATA expects global demand to reach 40 percent of pre-crisis levels in 2021. Capacity, measured in available seat kilometer, will likely increase faster than demand growth, reaching 50 percent of pre-crisis levels for 2021. This will lead to an average passenger load factor of just 67.1 percent, a level not seen since 1994. Next year, the passenger load factor should inch up to 75.1 percent.
While airlines’ financial performance in 2022 should be better than 2021, their profitability in 2021 is looking to be worse compared to earlier estimates. IATA now projects that net industry losses will top $51.8 billion, worsened from the $47.7 billion loss estimated in April. Moreover, net 2020 loss estimates have been revised to $137.7 billion, from $126.4 billion. Adding these up, total industry losses in 2020-2022 are expected to reach a staggering $201 billion. “The magnitude of the COVID-19 crisis for airlines is enormous,” concluded Walsh.
Walsh criticized airports and air navigation service providers of “shoring up” their finances by recovering lost revenue from their airline customers. “A $2.3 billion charges increase during this crisis is outrageous,” he said. “We all want to put Covid-19 behind us. But placing the financial burden of a crisis of apocalyptic proportions on the backs of your customers, just because you can, is a commercial strategy that only a monopoly could dream up." He vowed IATA will resist this price gauging, telling AIN the trade body will do "whatever it can to fight these unacceptable increases in charges."