CAPA summit to discuss decision-making for Covid-hit aviation industry

According to the IATA financial outlook, 2020 would be the worst year in the history of aviation, largely as a result of the Covid-19 pandemic

CAPA summit to discuss decision-making for Covid-hit aviation industry
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The CAPA World Aviation Outlook Summit will be held from December 2 to 3, 2020 at the London Stansted Airport. It will provide an outlook of the global aviation and market and take stock of the commercial and operational pillars that will drive decision-making in the industry in 2021.

Perhaps the biggest factor to consider while making decisions, in this regard, is the global Covid-19 pandemic and the way it has wreaked havoc in the aviation industry. 

According to the International Air Transport Association's (IATA) financial outlook, 2020 would be the worst year in the history of aviation. Airlines globally will lose $84.3 billion this year for a net profit margin of -20%. On average, the industry will see $230 million in losses every day this year. Revenue will be cut by half to $419 billion in 2020 from $838 billion the previous year.

The industry is expected to recover in 2021, and losses would be cut to $15.8 billion and revenues increase to $598 billion. 

Passenger numbers in 2020 would halve to 2.25 billion, which is roughly similar to what it was in 2006. This means that will lose $37.54 per passenger. Capacity will fall by 40.4% this year. 

The Covid-19 pandemic and resultant closure of international orders, lockdowns and suspension of air travel across the world have been the main contributor to the losses. This led to passenger demand plummeting. People have been afraid of catching the coronavirus and also have also been put off by the inconvenience that would be caused by layers of security and health checks necessitated by the pandemic. Thus even when air operations were started in a limited manner, demand has been slow to return.   

At the height of the crisis in April, global air travel was about 95% below the 2019 levels. There are indications now that traffic is picking up, but still, traffic levels for 2020, measured as Revenue Passenger Kilometres (RPK) is expected to contract by 54.7% over 2019, according to the IATA.

Passenger revenues have fallen to $241 billion from $612 billion in 2019. Passenger revenues have declined more than passenger demand, pointing towards an 18% fall in passenger yields, even though airlines have tried to attract passengers through price stimulation. 

The average load factor is expected to be 62.7% as compared to the record high of 82.5% in 2019. Load factor refers to the percentage of available seating capacity of an aircraft that is filled.

Alarmingly, the reduction in costs is not matching that of demand. Total costs in 2020 will be $517 billion, which is 34.9% below the 2019 levels, but revenues will decrease by 50%. Fuel prices will, however, give some relief to the stricken industry and cargo revenues will reach a near-record of $110.8 billion this year. 

According to a study by consulting group Five Aero, there have already been 3,50,000 job losses in the aviation sector at the global level and it could reach half-a-million by the end of the year.