Middle East airlines’ losses for 2021 to reduce by half from 2020

Middle East carriers net losses will reduce to -13.8 per cent of revenues in 2021, up from -28.9 per cent in 2020, the International Air Transport Association (IATA) says in its latest forecast.

IATA says regional carriers will benefit from relatively rapid vaccination rates on home markets. They will be hampered, however, by continued travel restrictions on many of the routes to emerging economies that are served through Gulf hub connections, the report added.

Globally, IATA expects net airline industry losses of $47.7bn in 2021 (net profit margin of -10.4 per cent). This is an improvement on the estimated net industry loss of $126.4bn in 2020 (net profit margin of -33.9 per cent).

Worldwide industry revenues are expected to total $458bn. That’s just 55 per cent of the $838bn generated in 2019 but represents 23 per cent growth on the $372bn generated in 2020.

Travel restrictions, including quarantines, have killed demand. IATA estimates that travel (measured in revenue passenger kilometres or RPKs) will recover to 43 per cent of 2019 levels over the year. While that is a 26 per cent improvement on 2020, it is far from a recovery. Domestic markets will improve faster than international travel. Overall passenger numbers are expected to reach 2.4 billion in 2021. That is an improvement on the nearly 1.8 billion who travelled in 2020, but well below the 2019 peak of 4.5 billion.

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Vaccination
International passenger traffic remained 86.6 per cent down on pre-crisis levels over the first two months of 2021. Vaccination progress in developed countries, particularly the US and Europe, is expected to combine with widespread testing capacity to enable a return to some international travel at scale in the second half of the year, reaching 34 per cent of 2019 demand levels. 2021 and 2020 have opposite demand patterns: 2020 started strong and ended weak, while 2021 is starting weak and is expected to strengthen towards year-end. The result will be zero international growth when comparing the two years.

Cargo has outperformed the passenger business throughout the crisis. That trend is expected to continue throughout 2021. Demand for cargo is expected to grow by 13.1 per cent over 2020. This puts the cargo business in positive territory compared to pre-crisis levels (2020 saw a full-year decline of 9.1 per cent compared to 2019). Total cargo volumes are expected to reach 63.1 million tonnes in 2021. That’s nearly at the pre-crisis peak of 63.5 million tonnes which occurred in 2018.

“This crisis is longer and deeper than anyone could have expected,” said Willie Walsh, IATA’s director-general. “Losses will be reduced from 2020, but the pain of the crisis increases. There is optimism in domestic markets where aviation’s hallmark resilience is demonstrated by rebounds in markets without internal travel restrictions.”

“Government-imposed travel restrictions, however, continue to dampen the strong underlying demand for international travel. Despite an estimated 2.4 billion people travelling by air in 2021, airlines will burn through a further $81bn of cash,” he added.

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