airline industry outlook
TRANSCRIPT
COVID-19Airline industry outlook
Ezgi Gulbas
Senior Economist
1
4th October 2021
COVID-19 is the biggest and longest shock to hit aviationPrevious shocks cut 5-20% from RPKs and recovered after 6-18 months
Source: IATA Economics using data from IATA Monthly Statistics. Data is adjusted for seasonality.
0
20
40
60
80
100
120
-1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Global passenger kilometres flown (RPKs), indexed
2003 SARSpandemic
COVID-19pandemic
1991 globalrecession
9/11 2001terroristattacks
2009 GreatRecession
Months after start of shock
Corporate taxes
Wage Subsidies
Loans
Blocked funds
Loan guarantees
Ticket taxes
Fuel taxes
Direct aid (cash injections, equity financing)
Total
81
73
38
26
13
12
1
0
243
Reimbursable/deferral
Non-reimbursable/waiver
Cost Avoidance
Financial aid made available to airlines due to COVID-19, by type (USD bn)
Source: IATA Economics
Financial aid has kept airline industry on life supportAirlines received $243bn of financial aid worldwide so far
Economic recovery boost air cargo and domestic travelInt. RPKs -68.8%, domestic RPKs -32.2%, CTKs +7.7% (Aug 21 vs Aug19)
Source: IATA Economics using data from IATA Monthly Statistics. Data is adjusted for seasonality.
0
20
40
60
80
100
120
140
Ja
n-1
9
Ma
r-1
9
Ma
y-1
9
Ju
l-1
9
Se
p-1
9
No
v-1
9
Ja
n-2
0
Ma
r-2
0
Ma
y-2
0
Ju
l-2
0
Se
p-2
0
No
v-2
0
Ja
n-2
1
Ma
r-2
1
Ma
y-2
1
Ju
l-2
1
RPKs and seasonally adjusted CTKs (indexed, Jan 2020 = 100)
Cargo tonne km (CTKs)
Domestic RPKs
International RPKs
2 – quarantine arrivals from high
risk regions
3 – closed to some regions
0 – no measures
4 – totalborder closure
1 - screening
JulJan Feb Mar Apr May Jun
Europe
Jul Aug Sep Oct Nov
Africa & Middle East
Dec Jan Mar May Jun Aug Sep
Central and South America
Asia-Pacific
AprFeb
North America
International travel stringency index weighted by population (Jan 2020-Sep 2021)
Source: IATA Economics analysis based on Oxford University data
Travel restrictions limit the international travel recoveryThere has been a modest easing of travel restrictions
Progress in vaccination would allow ease of restrictionsWidespread vaccination has been achieved in major developed markets
Source: IATA Economics using forecasts from Airfinity Science Tracker
Jan-21 Apr-21 Jul-21 Oct-21 Feb-22 May-22 Aug-22 Dec-22
US
UAE
UK
Canada
European Union
Japan
Australia
Brazil
Thailand
Egypt
Nigeria
Vietnam
Airfinity's vaccination rollout forecastHigh risk population vaccinated Healthcare & High risk population vaccinated
50% population vaccinated 75% adult population vaccinated
There is a substantial pent-up demand for travelUS-Europe reopening followed by surge in bookings
Source: IATA Economics using data from DDS
-100%
-90%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21
Bookings US-Europe, 7-day MA in % change vs 2019
Bookings made in the US
Bookings made in Europe
20th September:Travel ban will be liftedin November
Purchase date
Source: IATA Economics Airline Industry Financial Forecast update, October 2021
Recovery in international travel will be uneven in 2022Intra-Europe and Europe-Nth America travel will outpace Asia
30%
18%
28%
22% 22% 22%17%
38%
23% 25%
12%15%
2% 3%
75%
65%
41%
23% 25%
15%11%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Within Europe Europe-North
America
Asia-Middle East Asia-Europe Asia-North
America
Asia-Australasia Within Asia
Main International Routes (RPKs % of 2019 levels)
2020 2021E 2022F
Source: IATA Economics Airline Industry Financial Forecast update, October 2021
Domestic travel demand will continue to be strongDomestic RPKs will be 93%, international 44% of pre-crisis levels in 2022
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22
Global Revenue Passenger Km (Quarterly RPKs % of 2019)
International Domestic Total
Air cargo strong across the board with high demandBut capacity and supply chain issues limit further gains
Source: IATA Economics Airline Industry Financial Forecast update, October 2021
50
60
70
80
90
100
110
120
130
140Seasonally adjusted segment-based CTKs for main trade lanes, indexed, Jan 2020 = 100)
Eur-Asia
N Pacific
N Atlantic
Mid East-Europe
Mid East-Asia
Strong trade growth will sustain robust air cargo trafficAir cargo demand is expected to rise 13% above 2019 levels
Source: IATA Economics Airline Industry Financial Forecast update, October 2021
-15
-10
-5
0
5
10
15
20
25
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
% c
ha
ng
e y
ea
r-o
n-y
ea
r
Growth in cross-border trade and air cargo tonne km
Growth in cargo
Growth in cross-border trade
Load factors will improve but still below break-even levelPassenger load factors is expected to recover to 75% in 2022
Source: IATA Economics using data from IATA Monthly Statistics
58
60
62
64
66
68
70
72
74
76
78
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
% A
TK
s
Breakeven and achieved cargo+ passenger load factor
Achieved load factor
Breakeven load factor
Revenue recovery will continue in 2022 - to 79% of 2019Strong cargo revenues will be insufficient to offset loss in pax revenues
Source: IATA Economics Airline Industry Financial Forecast update, October 2021
0
100
200
300
400
500
600
700
800
900
2015 2016 2017 2018 2019 2020 2021 2022
US
D b
illio
n
Global airlines revenue, USD billion
Passenger revenues
Cargo revenues
2021:57% of 2019 level
2022:79% of 2019 level
Fuel cost will rise with the higher traffic and fuel pricesJet fuel price is expected to be $77.8/brl in 2022 vs $74.5/brl in 2021
Source: IATA Economics, Refinitiv Eikon data
0
20
40
60
80
100
120
140
0
10
20
30
40
50
60
70
80
90
100
2012 2014 2016 2018 2020 2022
Fuel Consumption and the price of jet fuel
Fuel consumption,bn gallons
Jet fuel priceUS$/bbl
Unit costs will continue to surpass passenger yieldsPassenger yields are expected to rise both in 2021 and 2022
Source: IATA Economics
50
60
70
80
90
100
110
120
130
140
150
2010 2012 2014 2016 2018 2020
ind
ex
ed
to
eq
ua
l 10
0 in
20
19
Airline non-fuel unit cost and passenger yield
Passenger yield
Non-fuel unit costs
Return to profitability will be delayed another year…With gradual traffic recovery, 2022 another year of loss
Source: IATA Economics Airline Industry Financial Forecast update, October 2021
-160
-140
-120
-100
-80
-60
-40
-20
0
20
40
60
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Airline industry net post-tax profits, USD bllion
N American airlines improving fast, other regions lag Operating margins will be negative in most of the regions
Source: IATA Economics Airline Industry Financial Forecast update, October 2021
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
N America Europe Asia Pacific Middle East L America Africa Industry
% r
ev
en
ue
Airline region operating margin, % revenue
2020 2021E 2022F