It is no secret that the airlines industry was badly hit by the COVID-19 pandemic in 2020. As travel came to a complete standstill, airline companies saw their traffic and revenues plummet massively. Even though the industry saw a slight pickup in travel towards the end of the year during the holiday season, it was still significantly lower compared to year-ago levels.
According to a report by data and analytics company Cirium, over two decades of traffic growth was erased in 2020 and the number of flying passengers are not expected to return to pre-pandemic levels until 2024.
Travel industry trends
The report states that the travel and tourism industry, which accounts for over 10% of global GDP, was hit hard. In 2020, global passenger airline traffic dropped to levels seen in 1999, indicating that 21 years of growth was decimated in just a few months.
2020 – A review
In February, closures in Asia led to the first peak of cancellations. This was followed by a second peak in March and April as the rest of the world closed down. The domestic market alone saw a recovery in June. Even during Thanksgiving, which is the peak travel period in the US, passenger flights were down 36% year-over-year in 2020.
Based on data from Cirium, 16.8 million scheduled passenger flights were completed globally between the period from January 1 to December 20, 2020. This reflects a 49% drop in flights from the same period in 2019. Of this number, the majority was domestic flights, which totaled 13 million, down 40% year-over-year. International flights dropped 68% YoY to 3.8 million in 2020.
Passenger traffic, which is measured through revenue passenger kilometers (RPKs), witnessed a significant drop this year. Global RPKs are estimated to have fallen 67% YoY to 2.9 trillion in 2020.
Looking at scheduled passenger flights flown from January-December 2020, Southwest Airlines (NYSE: LUV) was the top operator in North America with 869.8K flights according to data compiled by Cirium. This was followed by American Airlines (NYSE: AAL) at 604.1K flights and Delta Air Lines (NYSE: DAL) at 599.4K flights.
2021 and beyond
The report by Cirium states that cash burn will be a critical factor for the survival of airlines going into 2021. The International Air Transport Association (IATA) have forecasted that the industry as a whole is projected to turn cash positive in late 2021. IATA has also predicted that the number of flying passengers would not return to 2019 levels until 2024.
Looking ahead, Cirium projects a few key trends for the airline industry which include airline consolidation, aircraft retirements and reconfigurations, and an increase in aircraft leasing.
The report states that over 40 commercial airlines have ceased or suspended operations in 2020 and more continue to struggle. Cirium cites the possibility of mid-sized carriers in the US being merged with or acquired by larger competitors.
According to Cirium, due to a surplus in aircraft and a slow recovery in demand, there is likely to be an increase in aircraft retirements, particularly larger ones. Some aircraft types will be converted to cargo. Cirium projects around 66 aircraft conversions for 2020 and this number is projected to increase in 2021 and 2022, mainly driven by growth in e-commerce. In addition, due to financial constraints, there is likely to be an increase in aircraft leasing going forward.
Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!
While the markets got a boost a couple of weeks ago after Congress passed the new stimulus bill, investors seem to have adopted a cautious stance as details of the
Delta Air Lines (NYSE: DAL) reported fourth quarter 2020 earnings results today. Operating revenues fell 65% year-over-year to $4 billion. The company reported a GAAP net loss of $755 million,
Aphria Inc. (NYSE: APHA) reported second-quarter 2021 earnings results on Thursday. Revenues were C$160.5 million, an increase of 33% compared to the previous year. On an adjusted basis, the company reported earnings