Airline losses are surging to unprecedented levels expected to be more than three times those following the 2008 global economic slump, according to the industry’s main trade group.

The International Air Transport Association on Tuesday predicted carriers will lose a combined US$84 billion this year and almost US$16 billion in 2021, its first estimate of the hit to earnings since the Covid-19 crisis began. That compares with US$31 billion during the 2008-2009 recession.

The grim forecast comes as airlines seek to gradually restart operations with the pandemic beginning to recede.

Industry debt has jumped by about US$120 billion, a level many carriers will be unable to sustain without governments stepping in to convert borrowing into equity, the trade body said.

The alternative to a rise in state ownership would be mass bankruptcies, it said.

“Losses this year will be the biggest in aviation history,” IATA Chief Executive Officer Alexandre de Juniac said on a call with reporters. “There is no comparison for the dimensions of this crisis.”

While IATA hasn’t previously estimated losses, it said the anticipated decline in passenger revenue this year has widened to US$371 billion from the US$314 billion forecast in April. The drop including non-passenger sales may be US$419 billion.

Debt Burden

Losses will amount to between 15 per cent and 30 per cent of revenue depending on the region, with no prospect of a return to profitability until 2022 at the earliest even if there’s no second wave of coronavirus infections.

Airlines are set to end the year with about US$550 billion in total debt, IATA forecast. That means the sector’s borrowings next year will be 16 times earnings even on an Ebitdar basis, stretching from 4.6 times in 2019.

While some carriers may be able to cope by raising fresh equity themselves, stretched balance sheets are likely to lead to many states buying stakes, it said. Only US$11 billion of the US$123 billion in various forms of aid provided so far has been in the form of direct investment.

Global connectivity will also be reduced, with the number of city-pair links down by about 25 per cent by the end of the year even after operations resume, the trade body said. Yields, a measure of fares, are likely to be down by around 20 per cent as airlines cut prices to attract passengers back to travel.

--With assistance from Richard Weiss.