Airline industry outlook

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

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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.

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120

140

Ja

n-1

9

Ma

r-1

9

Ma

y-1

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Ju

l-1

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Se

p-1

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No

v-1

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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


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


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100

110

120

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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


-15

-10

-5

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5

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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

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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


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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

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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

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2010 2012 2014 2016 2018 2020

ind

ex

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eq

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l 10

0 in

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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


-160

-140

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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


-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

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10%

N America Europe Asia Pacific Middle East L America Africa Industry

% r

ev

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ue

Airline region operating margin, % revenue

2020 2021E 2022F

Contacts

[email protected]

www.iata.org/economics

Airline industry outlook

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