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Aviation Crisis “Devastating and Unrelenting”: IATA

By Alicia Arizpe | Thu, 11/26/2020 - 10:56

The COVID-19 outbreak continues to wreak havoc throughout the global aviation industry. While industry associations had previously estimated that losses would reach the tens of billions, a slower-than-expected recovery rate during summer months has prompted a revision. Now, the International Air Transport Association (IATA) estimates that the sector will see its revenue for 2020 cut by US$500 billion and airlines will see over US$100 billion in losses during the year.

As early as March, the global aviation industry identified that COVID-19 would have severe repercussions in the aviation industry. IATA’s March forecast estimated that the sector would see a US$113 billion loss in revenue against 2019’s US$838 billion gain. But losses have proven to be much larger than anticipated. MBN reported IATA was forced to reevaluate its forecast as the crisis advanced, gradually increasing expected revenue losses until they reached US$419 billion in September’s estimate.

On Tuesday, the association updated its forecast again putting the revenue drop at US$510 billion. Worse, even though airlines across the board have been implementing stringent cost-cutting measures, bringing them down from 2019’ US$795 billion to US$430 billion. However, this will not be enough to avoid ending the year in red. IATA forecasts that during 2020 the aviation industry will see a net loss of US$118.5 billion. “The history books will record 2020 as the industry’s worst financial year, bar none. Airlines cut expenses by an average of US$1 billion a day over 2020 and will still rack-up unprecedented losses,” said Alexandre de Juniac, Director General and CEO of IATA.

All regions in the world have and will continue to be affected. While Latin America saw a 91 percent contraction in connectivity, IATA explains that Mexico performed better that other countries in the region. Mexican airlines have also seen sharp reductions in passenger traffic, which placed a heavy burden in their finances. Earlier this year, the country’s flagship airline Aeroméxico filed for Chapter 11 bankruptcy protection in a US court as part of a financial restructuration to help it weather the crisis, according to a previous MBN article. However, in recent months Mexican airlines are reporting better traffic and a gradual recovery in demand that is leading them to reopen routes. 

The trouble faced by the global aviation industry is expected to continue until 2021. IATA also adjusted its forecast for 2021 to reflect the slower recovery the sector faces, estimating that next year airlines will see a net loss of US$38.7 billion.

Alicia Arizpe Alicia Arizpe Senior Writer