2020 was devastating for the airline industry, and it’s very likely everyone in the industry wants to forget it. What’s more, the effects of the pandemic were so grave, the airline industry will take many years to recover from it.
IATA’s prediction for this year doesn’t look promising. This organization announced a revised outlook for airline industry performance both for the past year and the current one with a statement that “deep industry losses” will continue to happen.
However, on a more positive note, performance is expected to improve. Firstly, when it comes to passenger numbers that are forecasted to grow up to almost three billion in 2021. Compared to 2019, this is a significant fall (almost 2 billion), but if we take 2020 into account we can see that that’s around one billion more travellers.
Furthermore, we can expect a slight improvement in the second half of this year, compared to the difficult beginning, IATA says. By its prognosis, increased demand for air travel should cause a cash increase in the fourth quarter of 2021. This looks promising, compared to previous forecasts.
Airlines around the globe will face a long way to recovery. If we assume that COVID-19 vaccine distribution and increase in mass testing will help in opening the borders by the mid-2021, we can hope for revenue growth. To be more precise, by IATA’s estimation airline revenue should grow to $459 billion this year. Compared to 2019, that’s a significant fall (45%), however, if we take the state of the airline industry in 2020, it’s a significant improvement.
Two key factors for the airline’s industry recovery
Bottom line, by IATA’s prognosis, there are two key factors that will help the industry to recover and bring back trust into air travel. First one is systematic passenger testing, and the other one is the vaccine that will be available to the general public.
However, one trend we will see rising is a shift towards domestic and short-haul travel since many people perceive it as safer. This means that the whole airline industry will improve its performance compared to 2021, however domestic markets are likely to perform better than international services.
Which region will be the first one to recover?
Even though we can expect a global recovery after the pandemic, some countries are more likely to recover than the other. By IATA’s estimations, air carriers in the Asia Pacific will be the first ones to recover. More specifically, Chinese air operators might be the first one to experience recovery in 2021, since the great part of the Chinese domestic market has already started to return to profitability since the end of 2020.
There are two reasons behind this claim. Firstly, the Chinese are successful in their efforts to control the virus and have a large number of cargo operations. Furthermore, airlines with large cargo operations already show better performance in a financial sense compared to those who mostly rely on commercial passenger flights.
Furthermore, airlines in the North American region are more likely to recover faster, since they have the largest domestic market in the world. On the flip side, IATA predicts that the European airlines will begin to recover in the second part of the year, after the mass vaccination. Lastly, Middle East airlines are more likely to grow their cargo business, and African and the Latin American market will face slower financial recovery.
The bottom line
Even though the numbers are looking gloomy compared to the pre-pandemic world, the airline industry’s recovery is moving forward. And even though this process might be painful, slow, and seemingly endless, we will be able to overcome it and see this industry in all of its glory.