The previous analysis was for 2021 revenues to be down around 29 per cent compared to 2019. This was based on expectations for a demand recovery commencing in the fourth quarter of 2020. Recovery has been delayed however, owing to new Covid-19 outbreaks, and government mandated travel restrictions including border closings and quarantine measures.
Iata expects full year 2020 traffic to be down 66 per cent compared to 2019, with December demand down 68 per cent.
The industry body presented new analysis showing that the airline industry cannot slash costs sufficiently to neutralize severe cash burn to avoid bankruptcies and preserve jobs in 2021.
It reiterated its call for government relief measures to sustain airlines financially and avoid massive employment terminations. Iata also called for pre-flight Covid-19 testing to open borders and enable travel without quarantine.
“The fourth quarter of 2020 will be extremely difficult and there is little indication the first half of 2021 will be significantly better, so long as borders remain closed and/or arrival quarantines remain in place. Without additional government financial relief, the median airline has just 8.5 months of cash remaining at current burn rates. And we can’t cut costs fast enough to catch up with shrunken revenues,” said Alexandre de Juniac, director-general and CEO of Iata.
Looking forward to 2021, Iata estimated that to achieve a breakeven operating result and neutralize cash burn, unit costs will need to fall by 30 per cent compared to average CASK for 2020. Such a decline is without precedent.
It said maintaining last year’s level of labour productivity would require employment to be cut 40 per cent. Further jobs losses or pay cuts would be required to bring unit labour costs down to the lowest point of recent years, a reduction of 52 per cent from 2020 Q3 levels.
“There is little good news on the cost front in 2021. Even if we maximize our cost cutting, we still won’t have a financially sustainable industry in 2021,” said de Juniac.
“The handwriting is on the wall. For each day that the crisis continues, the potential for job losses and economic devastation grows. Unless governments act fast, some 1.3 million airline jobs are at risk. And that would have a domino effect putting 3.5 million additional jobs in the aviation sector in jeopardy along with a total of 46 million people in the broader economy whose jobs are supported by aviation. Moreover, the loss of aviation connectivity will have a dramatic impact on global GDP, threatening $1.8 trillion in economic activity. Governments must take firm action to avert this impending economic and labor catastrophe. They must step forward with additional financial relief measures. And they must use systematic COVID-19 testing to safely re-open borders without quarantine,” said de Juniac.
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