The International Air Transport Association (IATA) has recently released a new analysis that shows the airline industry is expected to remain cash negative throughout 2021. According to a previous analysis published back in November last year, airlines where expected to turn cash positive in the fourth quarter of 2021. However, IATA says that at the industry level, airlines are now not expected to be cash positive until 2022.
Estimates for cash burn in 2021 have ballooned to the $75 billion to $95 billion range from a previously anticipated $48 billion. IATA mentioned it is already clear that the first half of 2021 will be worse than earlier anticipated as governments have tightened travel restrictions in order to the curb the spread of the new COVID-19 variants. Forward bookings for summer (July-August) are currently 78 per cent below levels in February 2019.
IATA shared that with airlines now expected to burn cash throughout 2021 it is important that governments and the industry are fully prepared to restart operations the moment governments agree that it is safe to re-open borders. Alexandre de Juniac, Director General, IATA said in a statement that with government introducing stringent border restrictions, 2021 is shaping up to be a much tougher year than previously expected.
He mentioned that IATA’s best-case scenario sees airlines burning through $75 billion in cash this year and it can even be as bad as $95 billion. He also informed that more emergency relief from governments will be needed. He assured that a functioning airline industry will be able to eventually energise the economic recovery from COVID-19 but warned that it would be impossible if there are massive failures before the crisis ends. He said that if governments are unable to open their borders, they will need to to open their wallets with financial relief to keep airlines viable.