The airline industry is gearing up for a difficult fourth quarter in 2020 as fresh outbreaks of coronavirus continue to crop up and restrictions remain in place on cross-border travel, the International Air Transport Association said in a press release Oct. 27.
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IATA expects 2020 traffic to be 66% less than 2019's level and December 2020 traffic to be 68% down year on year.
"The fourth quarter of 2020 will be extremely difficult and there is little indication the first half of 2021 will be significantly better, so long as borders remain closed and/or arrival quarantines remain in place," Alexandre de Juniac, IATA's director general and CEO, said.
"Without additional government financial relief, the median airline has just 8.5 months of cash remaining at current burn rates. And we can't cut costs fast enough to catch up with shrunken revenues."
In this context, the association expects total industry revenues in 2021 to fall 46% compared with the 2019 figure of $838 billion. This is a more significant drop than the previous estimate of a 29% decrease.
International demand is 90% lower, and so airlines have parked large numbers of mostly long-haul aircrafts and shifted to short-haul wherever possible, IATA said.
S&P Global Ratings expects global air passenger traffic to drop by 60%-70% in 2020 compared with 2019, it had said in August. This was a steeper drop than May's prognosis of a 50%-55% fall.
"We now expect 2021 air passenger traffic to decline 30%-40% compared with the 2019 base, and foresee a more gradual recovery to pre-COVID-19 levels by 2024," Ratings said.
Meanwhile, jet fuel prices, down around 42% from 2019, are expected to rise next year, as increased economic activity is anticipated, which implies higher energy demand, IATA said.
The Jet CIF NWE differential swap to the December ICE low sulfur gasoil futures was assessed at $4.25/mt on Oct. 26, with a steady rise to $26/mt in December 2021, according to S&P Global Platts data. The last time the prompt month was assessed at that level was on Feb. 12.