AsPac airlines biggest losers

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Airlines in Asia- Pacific are expected to post the largest absolute losses in 2020 as passenger demand significantly declined due to the closure of international borders to prevent the spread of the new coronavirus, according to latest report from International Air Transport Association (IATA).

IATA released its financial outlook for the global air transport industry showing that airlines are expected to lose $84.3 billion in 2020. Of the total, Asia-Pacific losses are projected to reach $29 billion this year.

Losses in North America are projected at $23.4 billion; Europe, $21.5 billion; Middle East $4.8 billion and; Latin America, $4 billion.

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All regions will post losses in 2020 with capacity cuts lagging about 10 to 15 percentage points or more behind the over-50 percent fall in demand.

“Asia Pacific was the first region to feel the brunt of the COVID-19 crisis,” IATA said.
IATA said the biggest driver of industry losses was the evaporated passenger demand as international borders closed. At the low point in April, global air travel was roughly 95 percent below 2019 levels.

Passenger revenues are expected to fall to $241 billion from $612 billion in 2019). This is greater than the fall in demand, reflecting an expected 18 percent fall in passenger yields as airlines try to encourage people to fly again through price stimulation.

“Financially, 2020 will go down as the worst year in the history of aviation. On average, every day of this year will add $230 million to industry losses. In total, that’s a loss of $84.3 billion. It means that–based on an estimate of 2.2 billion passengers this year–airlines will lose $37.54 per passenger. That’s why government financial relief was and remains crucial as airlines burn through cash,” said Alexandre de Juniac, IATA’s director general and chief executive officer.

In 2021, airlines will be in recovery mode as industry is expected to cut its losses to $15.8 billion but still well below pre-crisis levels (2019) on many performance measures.
Although losses will be significantly reduced in 2021 from 2020 levels, the industry’s recovery is expected to be long and challenging. Some factors include debt levels, operational efficiencies, recession and passenger confidences to travel.
“People will want to fly again, provided they have the confidence in their personal financial situation and the measures taken to keep travelers safe.” IATA said.
Philippine Airlines, Cebu Pacific and Philippines AirAsia have started to gradually resume operations after more than two months suspension of commercial flights.
The airlines earlier estimated their losses to be at P8 billion in each month of suspension, due to expenses on leases, salary and aircraft maintenances.
PAL has laid off 300 employees last March, AirAsia reduced its employees by 12 percent starting this month, while Cebu Pacific significantly cut its capital expenditure this year.

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