KUALA LUMPUR (Feb 25): The airline industry is expected to remain cash negative throughout 2021, according to a new analysis by the International Air Transport Association (IATA).

In a statement yesterday, IATA said previous analysis (November 2020) indicated that airlines would turn cash positive in the fourth quarter of 2021.

It said at the industry level, airlines are now not expected to be cash positive until 2022.

IATA said estimates for cash burn in 2021 have ballooned to the US$75 billion to US$95 billion range from a previously anticipated US$48 billion.

Among the factors it cited were a weak start for 2021.

IATA said it is already clear that the first half of 2021 will be worse than earlier anticipated, due to governments haing tightened travel restrictions in response to new COVID-19 variants.

It added that forward bookings for summer (July-August) are currently 78% below levels in February 2019 (comparisons to 2020 are distorted owing to COVID-19 impacts).

The association explained that from this lower starting point for the year, an optimistic scenario would see travel restrictions gradually lifted once the vulnerable populations in developed economies have been vaccinated, but only in time to facilitate tepid demand over the peak summer travel season in the northern hemisphere.

It said in this case 2021 demand would be 38% of 2019 levels.

It said airlines would burn through US$75 billion of cash over the year.

But cash burn of US$7 billion in the fourth quarter would be significantly improved from an anticipated US$33 billion cash burn in the first quarter, it said.

IATA said a pessimistic scenario would see airlines burn through US$95 billion over the year.

It said there would be an improving trend from a US$33 billion cash burn in the first quarter reducing to US$16 billion in the fourth quarter.

IATA said the driver of this scenario would be governments retaining significant travel restrictions through the peak northern summer travel season.

In this case, 2021 demand would only be 33% of 2019 levels.

IATA Director General and CEO Alexandre de Juniac said with governments having tightening border restrictions, 2021 is shaping up to be a much tougher year than previously expected.

“Our best-case scenario sees airlines burning through US$75 billion in cash this year. And it could be as bad as US$95 billion.

“More emergency relief from governments will be needed. A functioning airline industry can eventually energize the economic recovery from COVID-19.

“But that won’t happen if there are massive failures before the crisis ends. If governments are unable to open their borders, we will need them to open their wallets with financial relief to keep airlines viable,” he said.