IATA: Airlines' bumpy ride could last well into 2021

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Air traffic control tower [Credit: Ersin Ergin/Shutterstock.com]
Continued losses well into 2021 are likely to drive a number of airlines out of business, according to IATA's chief economist. Photo Credit: Ersin Ergin/Shutterstock.com

Airlines will lose $118.5 billion globally in 2020, according to the latest forecast by IATA.

In addition, carriers will burn through a projected $80 billion between the fourth quarter of this year and third quarter of next year, before potentially clawing their way back to profitability in the fall of 2021, IATA chief economist Brian Pearce said during the trade group's Annual General Meeting Tuesday, which is being held virtually.

In total, IATA projects the industry will lose $38.7 billion in 2021, with traffic recovering to approximately 50% of prepandemic 2021 projections. The continued losses are likely to drive more carriers out of business, Pearce said. IATA estimates that 40 to 50 airlines have shuttered during the Covid-19 crisis.

• Related: An app in the works would display a flyer's test and vaccination info

"I think it is inevitable that we are going to see a more consolidated industry in one or two years' time," Pearce said.

He credited the $173 billion in subsidies, loans and other support that governments have provided to airlines during the pandemic for preventing much broader damage thus far. But Pearce also noted that even airlines that ride out the crisis relatively well will emerge with weaker balance sheets and more debt. Overall, debt load in the industry has increased from $430 billion to $651 billion during the pandemic.

The IATA forecast incorporated recent news that Covid-19 vaccines will soon be ready for distribution. The trade group expects vaccination to be widespread enough to have a substantial impact on flyer numbers by the middle of next year. But distribution will be geographically uneven, with vaccination in the developing world likely to be slower than in wealthy countries.

On a regional level, IATA expects airlines in the Asia Pacific to have the lowest losses in 2021, largely because travel industry recovery in China and other countries in the region is way ahead of most of the world. North American airlines will fare next best , in large part due to the sizeable domestic air markets in the U.S. and Canada. Domestic flying has fared much better than international flying during the pandemic, with international demand marred by border closures and quarantines.

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