IATA: Airlines To Remain Cash Negative In 2021 Over Govts’ Restrictions

•  Estimates $95B cash burn
• Laments high fraudulent COVID-19 test results

From the International Air Transport Association (IATA) came a depressing disclosure that the first half of 2021 would be worse than earlier anticipated because governments have tightened travel restrictions in response to new COVID-19 variants.

The clearing house for over 290 global airlines in its analysis made available to Aviation Metric shows that the airline industry is expected to remain cash negative throughout 2021.

This is coming as the Director-General of IATA, Alexandre de Juniac lamented the prevalence of fraudulent COVID-19 test results which he said are already proving to be an issue.

He noted that the idea of the use of paper processes and differing digital standards for vaccine ramp up records by governments on who has been vaccinated is not the conditions needed to support a successful restart at scale when governments open borders.

He disclosed that WHO, ICAO, and OECD are working on standards, but regretted that each day without them means the challenge gets bigger.

Previous analysis (November 2020) indicated 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.

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

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.

From the optimistic scenario, IATA stated that in this case 2021 demand would be 38 per cent of 2019 levels, stressing that airlines would burn through $75 billion of cash over the year.

But noted that cash burn of $7 billion in the fourth quarter, would be significantly improved from an anticipated $33 billion cash burn in the first quarter.

de Juniac said, “With governments having tightening border restrictions, 2021 is shaping up to be a much tougher year than previously expected. Our best-case scenario sees airlines burning through $75 billion in cash this year. And it could be as bad as $95 billion”.

“More emergency relief from governments will be needed. A functioning airline industry can eventually energize 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.”

With airlines now expected to burn cash throughout 2021, the IATA chief reiterated that it is vital that governments and the industry were fully prepared to restart the moment governments agree that it is safe to re-open borders.

He further noted that preparing the industry to safely restart after a year or more of disruption would take careful planning and months of preparation.

To him, governments can ensure that airlines are prepared to reconnect people and economies by working with industry to develop the benchmarks and plans that would enable an orderly and timely restart.

“The UK has set a good example. Earlier this week it laid out a structure for re-opening based on an improvement in the COVID-19 situation. This gives airlines a framework to plan the restart, even if it needs to be adjusted along the way. Other governments should take note as a best practice for working with industry,” said de Juniac.

“Even as governments focus on managing the COVID-19 crisis, we must be thinking a step ahead to the plans, tools and standards needed to restart flying and energize the economic recovery from COVID-19. “Working in partnership is nothing new for airlines or for governments. It’s how we have delivered safe, efficient, and reliable connectivity for decades. For a year it’s been lock-downs and restrictions as vaccines were developed and testing capacity expanded.”

“The reason for all the pain that this has caused is to keep people safe and to eventually be able to retore their well-being and that of the economy. With good news on vaccines and growing testing capacity, there is a glimmer of light at the end of the tunnel. So, it’s the time to ask governments for their restart plan and to offer any support from industry that could help,” de Juniac stated..

Wole Shadare