The airline industry is expected to remain cash negative throughout 2021, according to new analysis by the IATA, overriding a previous forecast that airlines would turn cash positive in the fourth quarter of 2021.

At the industry level, airlines are now not expected to be cash positive until 2022, IATA said in a statement.

Estimates for cash burn in 2021 have ballooned to the US$75 billion to US$95 billion range from a previously anticipated US$48 billion.

Factors that play into this estimate include a weak start for 2021, with it being evident that 1H2021 will be worse than earlier anticipated, due to governments tightening travel restrictions to combat new Covid-19 variants.

Forward bookings for summer (July-August) are currently 78 per cent below levels in February 2019 (comparisons to 2020 are distorted owing to Covid-19 impacts).

From this lower starting point for the year, an optimistic scenario would see travel restrictions gradually lifted once the vulnerable populations in developed economies have been vaccinated, but only in time to facilitate tepid demand over the peak summer travel season in the northern hemisphere. In this case, 2021 demand would be 38 per cent of 2019 levels. Airlines would burn through US$75 billion of cash over the year. But cash burn of US$7 billion in 4Q would be significantly improved from an anticipated US$33 billion cash burn in 1Q.

In the pessimistic scenario, airlines would burn through US$95 billion over the year. There would be an improving trend from a US$33 billion cash burn in 1Q reducing to US$16 billion in 4Q. The driver of this scenario would be governments retaining significant travel restrictions through the peak northern summer travel season. In this case, 2021 demand would only be 33 per cent of 2019 levels.

“With governments having tightening border restrictions, 2021 is shaping up to be a much tougher year than previously expected,” said Alexandre de Juniac, IATA’s director general and CEO.

“Our best-case scenario sees airlines burning through US$75 billion in cash this year. And it could be as bad as US$95 billion. More emergency relief from governments will be needed. A functioning airline industry can eventually energise 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.”

Source: ttgasia