Mumbai: The airline industry is expected to remain cash negative throughout 2021, according to the latest analysis released by International Air Transport Association (IATA). Previous analysis, done in November last year had 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 have ballooned to the $75 billion to $95 billion range from a previously anticipated $48 billion,’’ said IATA adding that one of the influencing factor was the weak start for 2021 because of governments tightening travel restrictions in response to new COVID-19 variants. Forward bookings for summer (July-August) are currently 78% below levels in February 2019 (comparisons to 2020 are distorted owing to COVID-19 impacts), it said.
The IATA analysis put out two scenarios: optimistic and pessimistic. ``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,’’ it said. In this case 2021 demand would be 38% of 2019 levels. Airlines would burn through $75 billion of cash over the year. But cash burn of $7 billion in the fourth quarter would be significantly improved from an anticipated $33 billion cash burn in the first quarter, it added.
On the other hand, if one had to consider the pessimistic scenarios then airlines burn through $95 billion over the year. ``There would be an improving trend from a $33 billion cash burn in the first quarter reducing to $16 billion in the fourth quarter. The driver of this scenario would be governments retaining significant travel restrictions through the peak northern summer travel season. In this case, 2021 demand would only be 33% of 2019 levels,’’ said IATA.
“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,” said Alexandre de Juniac, IATA’s director general and CEO.
24/02/21 Manju V/Times of India
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