COVID-19

Outlook for airlines’

cash burn

Brian Pearce
Chief Economist
6th October 2020

1
 Financial markets pessimistic about airlines’ cash burn
Airline share prices remain 40% down, yet equity market has recovered
Worldwide share prices, airlines and all sectors
130
FTSE All World
120
Indexed to equal 100 in January 2019

Share Index
110

100

90

80
Reuters World Airlines
70 Share Index
60

50

40
Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20
Source: IATA Economics using data from Refinitive Datastream
 Airlines have been kept on life support
$160bn aid from government and another $20bn from suppliers
Government aid made available to airlines due to COVID-19, by type (USD bn)

Direct aid
(subsidies, loans, 99,7
equity, cash injection)

Wage subsidies 40,1

Corporate taxation 12,0

Industry taxation 9,5

Fuel charges 0,7

Total 161,9

Source: IATA Economics using public information and data from SRS Analyser, DDS, FlightRadar 24, TTBS, ACIC, Platts, Airline
Analyst, annual reports. Government measure included up until 7 Sep 2020
 Government support for wages is starting to end
The restart is not strong enough to prevent substantial job losses
Most wage subsidies are coming to an end…

End date of 36 wage subsidy programmes globally

All wage subsidy

programmes* 36

Ending Q2 2020 8

Ending Q3 2020 13

Ending Q4 2020 7

Ending Q1 2021 4

Ending Q2 2021 2

Ending Q3 2021 0

Ending Q4 2021 2

*includes programmes where information on end date available

Source: IATA Economics using public information and data from SRS Analyser, DDS, FlightRadar 24, TTBS, ACIC, Platts, Airline
Analyst, annual reports. Government measure included up until 1 Oct 2020
 Passenger revenues not expected to recover quickly
By year-end RPKs only 1/3 of normal levels and yields down sharply
Global RPK growth
20%

0%
% change year-on-year

-20%
Growth
rate in
Dec
-40%
July
forecast
-55%
-60%
-68%

-80%
September
forecast
-100%
Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20

Source: IATA Economics

 Airlines unable to downsize fleet proportionately
Short-haul flying requires a higher proportion of the aircraft fleet
Commercial airlines' fleet of jets and turboprops
35,000

30,000

In service
25,000
-23%
Number of aircraft

20,000

15,000

10,000
In storage
5,000

0
Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20
Source: IATA Economics analysis based on data from Cirium Ascend
 The challenge is to downsize costs sufficiently
Many costs are hard to avoid as we saw in the 2020Q2 results
Operating revenues and costs changes in 2020 Q2
40%

20%
% change year-on-year

0%

-20%

-40%

-60%

-80%

-100%
Passenger Cargo Total revenue Total costs Fuel Infrastructure MRO Labour
charges

Source: IATA Economics analysis based on data from the Airline Analyst
 Cash burn was probably at its greatest in 2020 Q2
Cash ($51bn) drained by unavoidable costs, debt interest and refunds

Source: IATA Economics analysis

 Cash burn continuing during 2020 H2 by $77bn
Revenues weak, Government aid diminishing, restructuring beginning

Source: IATA Economics analysis

 Even after large cash raise many airlines at risk
Median airline’s cash would last just 8.5 months at H2 rate of cash burn
2020 end June cash+cash equivalents/2020 H2 monthly cash burn

25

20
Months

15

Median airline
10
8.5 months of cash

0
1 2 3 4 5 6 7 8 9
Individual airlines
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

Source: IATA Economics using data from the Airline Analyst

 Airlines not expected to turn cash positive until 2022
Extended weakness of revenues will delay financial turnaround
Airline industry quarterly cash burn forecast
2020Q2 2020Q3 2020Q4 2021Q1 2021Q2 2021Q3 2021Q4
0

-10
$ billion during quarter

-20

-30

-40

-50

-60

Source: IATA Economics analysis

Contacts
economics@iata.org
www.iata.org/economics