How Covid ripped apart global airlines' business
Carriers have been put through the wringer, air passenger traffic slumps 94%
image for illustrative purpose
Few sectors of the battered global economy have been hit as hard as the airline industry in 2020. The coronavirus pandemic left fleets of planes grounded and caused air passenger traffic to slump as much as 94 per cent. Cash-strapped carriers have been struggling to rebuild, hampered by further waves of infection and strict curbs on travel.
From crippling financial losses and painfully diminished market values to shrunken networks and mounting debt piles, the industry has been put through the wringer. "If there ever was an annus horribilis, this is it," International Air Transport Association Director General Alexandre de Juniac said. "Nobody in aviation will ever be nostalgic for 2020."
Airline borrowings have climbed to record levels as carriers struggle to keep their heads above water. State aid to the sector has reached a gargantuan $220 billion, according to IATA. Credit ratings company Moody's Investors Service forecasts a further $22 billion of liabilities will be added in 2021. Companies will also need to refinance some of the emergency debt accumulated, while those now saddled with government shareholders must examine whether they can repay borrowings and become masters of their own destinies again.
Carriers will hemorrhage more than $118 billion this year and almost $39 billion in 2021, according to IATA. That's way beyond the trade group's predictions in June, when carriers retained hopes for a late summer surge in traffic, only to see them dashed by new waves of the virus. The estimated losses represent the worst two years for the industry and dwarf those racked up during the last major aviation slump in 2008. They also mark an abrupt end to a decade-long run of positive earnings, highlighting the lingering vulnerability of carriers even after years of consolidation and investment in more efficient aircraft.
Meanwhile, the number of scheduled flights worldwide has remained stubbornly low since a May trough, leading traveler numbers to drop to levels last seen 17 years ago. Airlines have blamed the extended slump on government curbs such as quarantines for arriving passengers, as well as a failure to embrace airport testing, arguing that pent up demand for travel is being strangled. (Bloomberg)
Angus Whitley & Christopher Jasper
