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Airlines Losses Expected to Continue

March 2, 2021.

The International Air Transport Association (IATA) has released new analysis showing that the airline industry is expected to remain cash negative throughout 2021. Previous analysis it completed in Nov-2020 indicated that airlines would turn cash positive in the fourth quarter of 2021, but at an industry level, it now projects that airlines are now not expected to be cash positive until 2022.

The change is mainly due to a “worse than earlier anticipated” start to 2021 as governments have tightened travel restrictions in response to new COVID-19 variants. Forward bookings for summer (Jul-2021 and Aug-2021) are currently -78% below levels in Feb-2019, while and estimates for cash burn for the current calendar year “have ballooned to the USD75 billion to USD95 billion range” in IATA’s expectations from a previously anticipated USD48 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,” according to IATA.

In this case 2021 demand would at best reach just over a third (38%) of 2019 levels, projects IATA, and airlines would burn through USD75 billion of cash over the year in its estimations. However, cash burn of USD7 billion in the fourth quarter would be significantly improved from an anticipated USD33 billion cash burn in the first quarter, under this optimistic viewpoint.

But, things could be different. A pessimistic scenario from IATA would see airlines burn through USD95 billion over the year. There would be an improving trend from a USD33 billion cash burn in the first quarter reducing to USD16 billion in the fourth quarter. The d