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The crisis provoked by the coronavirus pandemic is still making grave impacts on the entire world, and on aviation in particular. The year of 2020 has already come into history as a year of extreme challenges.
According to the International Air Transport Association (IATA), airlines are expected to lose $84.3 billion in 2020 for a net profit margin of -20.1%. In 2021, losses are expected to be cut to $15.8 billion as revenues rise to $598 billion.
“Financially, 2020 will go down as the worst year in the history of aviation. On average, every day of this year will add $230 million to industry losses. In total that’s a loss of $84.3 billion,” said Alexandre de Juniac, IATA’s Director General and CEO.
Estimating that there would not be a second wave of the pandemic, the industry hit the bottom in April. The airlines are step by step reporting about recovering domestic traffic, which proves that gradually aviation is taking off.
“Competition among airlines [in 2021] will no doubt be even more intense. That will translate into strong incentives for travelers to take to the skies again. The challenge for 2022 will be turning reduced losses of 2021 into the profits that airlines will need to pay off their debts from this terrible crisis,” said de Juniac.
According to IATA, airlines entered 2020 in relatively good financial shape. After a decade of profits, debt levels were relatively low ($430 billion, roughly half annual revenues).
Vital financial relief measures by governments have kept airlines from going bankrupt but have ballooned debt by $120 billion to $550 billion which is about 92% of expected revenues in 2021.
Further relief measures should be focused on helping airlines to generate more working capital and stimulating demand rather than further expanding debt.