Air travel demand in the Middle East during 2021 is forecast to be nearly 67 percent lower than 2019, before the coronavirus pandemic decimated the global aviation industry.
The International Air Transport Association (IATA) said on Wednesday that the region is likely to see the slowest demand rebound of any in the world with North America seeing the fastest (down 41.5 percent on 2019).
It added that Middle East airline capacity is likely to be 59 percent down on 2019 although losses are set to shrink to $4.2 billion from $7.9 billion last year.
IATA said in a statement: “Middle Eastern carriers will benefit from relatively rapid vaccination rates on home markets. They will be hampered, however, by continued travel restrictions on many of the routes to emerging economies that are served through Gulf hub connections.
“Net losses in 2021 are forecast at -13.8 percent of revenues (reduced from -28.9 percent of revenues in 2020). It will be the third smallest regional loss.”
The figures were released on the same day that Emirates said it may need to tap Dubai’s government for an equity injection if demand doesn’t rebound from the coronavirus crisis in the next six to eight months.
Should traffic remain subdued “we will make the recommendations to the government as where to go with regards to raising more cash,” Tim Clark, the carrier’s president, said in a World Aviation Festival webinar.
He said other options for state-owned Emirates, which got $2 billion from Dubai in March last year, include taking on more debt.
Globally, IATA said it expects net airline industry losses of $47.7 billion in 2021, an improvement on the estimated net industry loss of $126.4 billion in 2020.
Willie Walsh (pictured below), IATA’s director general, said: “This crisis is longer and deeper than anyone could have expected. Losses will be reduced from 2020, but the pain of the crisis increases. There is optimism in domestic markets where aviation’s hallmark resilience is demonstrated by rebounds in markets without internal travel restrictions.
“Government imposed travel restrictions, however, continue to dampen the strong underlying demand for international travel. Despite an estimated 2.4 billion people travelling by air in 2021, airlines will burn through a further $81 billion of cash.”
The outlook points to the start of industry recovery in the latter part of 2021.
In the face of the ongoing crisis, IATA urged governments to have plans in place so that no time is lost in restarting the sector when the epidemiological situation allows for a re-opening of borders.
“Most governments have not yet provided clear indications of the benchmarks that they will use to safely give people back their travel freedom. In the meantime, a significant portion of the $3.5 trillion in GDP and 88 million jobs supported by aviation are at risk. Effectively restarting aviation will energise the travel and tourism sectors and the wider economy. With the virus becoming endemic, learning to safely live, work and travel with it is critical. That means governments must turn their focus to risk management to protect livelihoods as well as lives,” said Walsh.
Industry losses of this scale imply a cash burn of $81 billion in 2021 on top of $149 billion in 2020. Government financial relief measures and capital markets have been filling this hole in airline balance sheets, preventing widespread bankruptcies.
“Owing to government relief measures, cost-cutting, and success in accessing capital markets, some airlines appear able to ride out the storm. Others are less well-cushioned and may need to raise more cash from banks or capital markets. This will add to the industry’s debt burden, which has ballooned by $220 billion to $651 billion. There is a definite role for governments in providing relief measures that ensure critical employees and skills are retained to successfully restart and rebuild the industry,” added Walsh.
IATA said the whole industry will come out of the crisis financially weakened, adding that cost containment and reductions, wherever possible, will be key to restoring financial health.
IATA estimates that global travel will recover to 43 percent of 2019 levels over the year. While that is a 26 percent improvement on 2020, it is far from a recovery, it added.
International passenger traffic remained 86.6 percent down on pre-crisis levels over the first two months of 2021. Vaccination progress in developed countries, particularly the US and Europe, is expected to combine with widespread testing capacity to enable a return to some international travel at scale in the second half of the year, reaching 34 percent of 2019 demand levels.
Industry revenues are expected to total $458 billion. That’s just 55 percent of the $838 billion generated in 2019 but represents 23 percent growth on the $372 billion generated in 2020.
Passenger revenues are expected to total $231 billion, up from $189 billion in 2020, but far below the $607 billion generated in 2019 while cargo revenues are expected to reach $152 billion, an historic high.
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