Iata slashes next year's airline revenue forecast on Covid-19 resurgence

Even with drastic cost-cutting, airlines need further govt aid to avoid running out of cash, it says

The International Air Transport Association urged airports and air traffic controllers not to increase their prices to cover shortfalls from the vastly lower traffic. And it warned that relief for airlines this year on fuel costs is expected to fade
The International Air Transport Association urged airports and air traffic controllers not to increase their prices to cover shortfalls from the vastly lower traffic. And it warned that relief for airlines this year on fuel costs is expected to fade away next year. PHOTO: BLOOMBERG

PARIS • Airline industry revenues are expected to remain 46 per cent lower next year than the US$838 billion (S$1.1 trillion) booked in the last pre-coronavirus year of 2019, the International Air Transport Association (Iata) said on Tuesday in a marked worsening of its forecasts.

Its previous outlook for a smaller drop of 29 per cent "was based on expectations for a demand recovery commencing in the fourth quarter of 2020".

That is now unlikely to materialise because of renewed Covid-19 outbreaks and government restrictions in response, said the federation representing 290 airlines.

Over the full year in 2020, Iata forecasts a 66 per cent drop in traffic compared with last year.

Iata director general Alexandre de Juniac said in a statement: "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."

Even with drastic cost-cutting, airlines will need further government aid to avoid running out of cash, he added.

Iata also urged airports and air traffic controllers not to increase their prices to cover shortfalls from the vastly lower traffic. And it warned that relief for airlines this year on fuel costs, due to low oil prices, is expected to fade away next year.

"Even if we maximise our cost cutting, we still won't have a financially sustainable industry in 2021," said Mr de Juniac, adding that 1.3 million jobs were at risk in the aviation industry alone, with potential knock-on effects on millions more.

Nearly 200 European airports also risk insolvency in the coming months if passenger traffic does not recover, a trade association warned on Tuesday.

Airports Council International (ACI) Europe said the 193 airports facing insolvency are mainly regional airports that serve local communities.

But combined, they support more than a quarter of a million jobs and US$15.6 billion in gross domestic product.

The trade association said: "The threat of airport closure means Europe faces the prospect of the collapse of a significant part of its air transport system - unless governments step up to provide the required support."

A number of European nations have moved to provide specific help for airlines in addition to support measures offered to all companies hit by pandemic-related restrictions.

ACI Europe's figures show airport passenger traffic was down 75 per cent in the middle of this month, which means airports - like airlines - have trouble covering operating costs.

The trade body called on European nations to shift to testing air passengers for Covid-19 rather than imposing quarantines on travellers.

AGENCE FRANCE-PRESSE

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A version of this article appeared in the print edition of The Straits Times on October 29, 2020, with the headline Iata slashes next year's airline revenue forecast on Covid-19 resurgence. Subscribe