Wednesday, 24 February 2021

The airline industry is burning through between $75 billion and $95 billion

The airline industry is burning through cash like never before,  a figure that's ballooned to as much as $95 billion.  

The reasons why so much money is being spent during this time of a global pandemic are many, but include a poor start to 2021. It is fairly clear to most in the industry that the first half of this year isn't shaping up to be great. Indeed, many predictions are turning out to be rather over-optimistic and the true picture will not be quite so rosy.  Many, including The International Air Transport Association (IATA) say this is because of reimposed travel restrictions, more border closures and worries over the new emerging strains of the virus. Plus, future booking numbers are also down, which doesn't bode well for the rest of this year. 

Another reason is that many airlines, travel arrangers and holiday companies have decided that, this year is going to be pretty much a write-off anyway and whilst they will continue with a small schedule for the bulk of this year,  they are putting so much more of their resources in a massive rebound for 2022

 IATA predicts the airline industry will burn through $95 billion over the year,  slight reductions in cash burn each quarter until the end of the year.  It is a particularly pessimistic prediction,  assuming governments and officials will keep most of the current travel restrictions in place. 

 Even in an optimistic scenario, where travel restrictions are gradually lifted once the bulk of the at-risk populations are vaccinated the demand would be 38% of 2019 levels and airlines would burn through about  $75 billion of cash over the year. 

Alexandre de Juniac, IATA’s Director General and CEO said: "With governments having tightening border restrictions, 2021 is shaping up to be a much tougher year than previously expected. Our best-case scenario sees airlines burning through $75 billion in cash this year. And it could be as bad as $95 billion. More emergency relief from governments will be needed. A functioning airline industry can eventually energize the economic recovery from COVID-19. But that won’t happen if there are massive failures before the crisis ends. If governments are unable to open their borders, we will need them to open their wallets with financial relief to keep airlines viable,"  

"The UK has set a good example. Earlier this week it laid out a structure for re-opening based on an improvement in the COVID-19 situation. This gives airlines a framework to plan the restart, even if it needs to be adjusted along the way. Other governments should take note as a best practice for working with industry," said de Juniac.

Whether IATA's predictions turn out to be so sharp and accurate you'll wish they did lottery results as well, or so wildly off-target it would be akin to finding a grain of rice on the surface of Mars, remains to be seen. There are a vast amount of variables that contribute to either scenario to get anywhere near the end results that it can be hard to comprehend. Not least to consider it the public appetite for future travel and their confidence in airlines remaining safe. In a recent survey, only 39.5% of people believed that European airlines were doing all they could to keep passengers safe during the changing pandemic situation.   







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