IATA June 2020 PDF
IATA June 2020 PDF
IATA June 2020 PDF
Brian Pearce
Chief Economist
9th June 2020
1
Phased re-opening of air travel markets
RPKs rising first on domestic markets and later on international in 2020
Global RPKs, billion per month
800
700
600
Billions, monthly
500 -36%
400
300
200
100
0
Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21
Source: IATA Economics using data from WHO and IATA passenger survey
Air cargo services in strong demand relative to capacity
Disappearance of passenger belly capacity created significant shortage
Cargo tonne kilometers flown, capacity and load factors
110 61%
Cargo load factor
Indexed to equal 100 in December 2019
58%
55%
90
52%
80
49%
70
46%
Cargo traffic (CTKs)
60
43%
Cargo capacity (ACTKs)
50 40%
Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20
Cash burn of
$61bn in Q2
Loans 50
Wage subsidies 35
Loan guarantees 12
Equity financing 11
Ticket taxes 9
Corporate taxes 3
Operating subsidies/
2
Route funds
Cash injections 1
Fuel taxes 1
Total 123
Source: IATA Economics using data from own estimates of Government aid, private debt estimates from Airfinance Journal ‘Cash
Burn and Liquidity Webinar, 14 May 2020. Debt includes adjustment for operating leases.
Demand for air cargo and travel will rise sharply in 2021
Stronger volumes next year but demand remains well below 2019 levels
Global passenger kms (RPKs) and cargo tonne kms (CTKs) flown
110
+25% vs 2020
100 Cargo tonne kilometers flown +3% vs 2019
90
Index to 100 in 2019
80
+55% vs 2020
70 -29% vs 2019
60
40
30
2007 2009 2011 2013 2015 2017 2019 2021
100
90
Impact of
80 Passenger yield pressures to
70 stimulate
demand
60
50
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: IATA Economics Economic Performance of the Airline Industry, Mid-Year 2020
Profit margins devastated in all regions this year
Net losses of 15-30% of revenues as some costs unavoidable
Net profit as a % of revenue
2019 2020
10%
5%
0%
% operating revenue
-5%
-10%
-15%
-20%
-25%
-30%
-35%
N America Europe Asia Pacific Middle East L America Africa
Source: IATA Economics Economic Performance of the Airline Industry, Mid-Year 2020
Unprecedented 2020 loss narrowed but not eliminated
After $84bn net loss this year we forecast further loss of $15bn in 2021
60 Airline industry net profits and EBIT margin 15
20 5
0 0
% of revenue
US$ billion
-20 -5
-40 -10
-60 -15
-80 -20
-100 -25
2007 2009 2011 2013 2015 2017 2019 2021
Source: IATA Economics Economic Performance of the Airline Industry, Mid-Year 2020
Return on invested capital rises but still far from WACC
ROIC improves in 2021 but returns remain below ‘normal’ for investors
Airline industry return on capital (ROIC) and cost of capital (WACC)
15
5
% of invested capital
-5
-20
2007 2009 2011 2013 2015 2017 2019 2021
Source: IATA Economics Economic Performance of the Airline Industry, Mid-Year 2020
Even before COVID-19 much of the industry was fragile
Only around 30 airlines drove improvement. Long tail of weaker airlines
World's airlines ranked by economic profits
2000
1500 2017
1000 2018
0 in order of
economic
0 10 20 30 40 50 60 70 80 90 100 110 120
profits
-500
-1000
-1500
-2000
-2500
Source: IATA Economics using data from a McKinsey study for IATA
Outside the top-30 balance sheets debt levels were high
So many airlines will have fixed obligations of debt to service and repay
Net debt adjusted for operating leases / EBITDAR
8
7
Net debt adjusted for operating leases /
5
EBITDAR
3 Top-30 airlines
1 Investment grade
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: IATA Economics using data from the Airline Analyst, own estimates
Projected debt burden not sustainable
Net debt/EBITDAR of 4.6x in 2019 may rise to 16x in 2021
Net debt/EBITDAR
(Note: EBITDAR proxy for operating cash flow)
20
15
ratio, net debt/EBITDAR
10
-10
2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: IATA Economics Economic Performance of the Airline Industry, Mid-Year 2020
Risk that city-pair connectivity may not fully recover
Flows of trade, investment, tourism critical for wider economic recovery
Unique city-pair services & the real cost of air transport for users
25,000 1.80
city-pairs
flown 1.40
15,000
1.20
10,000
Real cost of air transport 1.00
for users April
5,000 2020
0.80
0 0.60
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Source: IATA Economics Economic Performance of the Airline Industry, Mid-Year 2020
Contacts
economics@iata.org
www.iata.org/economics