The airline industry will need to decrease jobs to save costs and avoid bankruptcies in 2021 after the coronavirus (COVID-19) had severely affected the industry due to lockdowns and suspension of flights, the International Air Transport Association (IATA) announced.
In 2021, the industry’s revenues are expected to plunge by 46% when compared to $838 billion in 2019, lower than 29% in IATA’s previous forecasts, according to a recent press release.
Previously, IATA projected that a demand recovery would be witnessed at the beginning of the fourth quarter (Q4) of 2020.
However, the recovery was delayed amid the rising number of COVID-19 cases and new travel restrictions imposed by governments, including border closings and quarantine measures.
The international demand has decreased by about 90%, pushing airlines to park thousands of long-haul aircraft and shift their operations to short haul flying.
In 2020, the airline industry’s traffic is forecast to slash by 66% when compared to 2019.
Amid these circumstances, the industry would be required to decrease its employment rate by 40% to maintain the 2019 level of labour productivity, a reduction of 52% from its levels during the third quarter (Q3) in 2020.
Job layoffs or pay cuts would be necessary for reducing labour costs to the lowest level of recent years.
IATA’s Director General and CEO, Alexandre de Juniac, said: “There is little indication the first half of 2021 will be significantly better, so long as borders remain closed and/or arrival quarantines remain in place. Without additional government financial relief, the median airline has just 8.5 months of cash remaining at current burn rates.”
Juniac added: “There is little good news on the cost front in 2021. Even if we maximize our cost-cutting, we still will not have a financially sustainable industry in 2021.”