Why the airline industry's $128 billion loss could mean travel bargains

It's an industry in the brace position.
It's an industry in the brace position. Photo credit: Getty

The International Air Transport Association (IATA) has forecast the airline industry will lose NZ$128 billion this year due to the COVID-19 pandemic.

It's a reduction in the industry's revenue by a half and will be the worst year in the history of commercial travel - but it likely means bargains are on the horizon in 2021.

Airlines are operating at a fraction of their usual capacity, with some parking almost their entire fleet.

Demand will grow in 2021, but nowhere near to the levels of 2019.
Demand will grow in 2021, but nowhere near to the levels of 2019. Photo credit: IATA/Newshub.

IATA said revenue would likely fall to NZ$641 billion from NZ$1.2 trillion last year.

"Every day of this year will add NZ$352 million to industry losses," IATA Director General Alexandre de Juniac said.

And the figures are just as concerning here in New Zealand.

In an interview on The AM Show on Wednesday, Air New Zealand's chief revenue officer Cam Wallace revealed the airline is losing NZ$22 million every month.

In for the long-haul:

  • Cathay Pacific and the Hong Kong government announced a NZ$7.7 billion recapitalisation plan earlier this week
  • The New Zealand Government offered Air NZ a special NZ$900 million loan, but it's yet to be touched
  • IAG, the owners of British Airways, has accessed approximately NZ$2.3 billion in state-supported funding 
  • The Australian government has paid out NZ$764 million to airlines so far
  • The United States government has agreed to a NZ$38 billion bailout for the country's airline industry
  • EasyJet was given a NZ$1.1 billion loan from the UK Treasury

IATA predicts losses in 2021 could increase to NZ$153 billion as airlines slash their airfares in an attempt to win business.

"Airlines will still be financially fragile in 2021," De Juniac said.

"That will translate into strong incentives for travellers to take to the skies again."

Passenger numbers are predicted to drop to 2.25 billion this year before rising to 3.38 billion in 2021, which will still be more than 25 percent below 2019's number.