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COVID-19Outlook for airlines’
cash burn
Brian Pearce
Chief Economist
1
6th October 2020
Financial markets pessimistic about airlines’ cash burnAirline share prices remain 40% down, yet equity market has recovered
Source: IATA Economics using data from Refinitive Datastream
40
50
60
70
80
90
100
110
120
130
Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20
Ind
ex
ed
to
eq
ua
l 10
0 in
Ja
nu
ary
20
19
Worldwide share prices, airlines and all sectors
FTSE All World Share Index
Reuters World Airlines Share Index
Airlines have been kept on life support$160bn aid from government and another $20bn from suppliers
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
0,7
Wage subsidies
Industry taxation
Fuel charges
Direct aid (subsidies, loans,
equity, cash injection)
40,1
Corporate taxation
Total
99,7
9,5
12,0
161,9
Government aid made available to airlines due to COVID-19, by type (USD bn)
Government support for wages is starting to endThe restart is not strong enough to prevent substantial job losses
36
2
8
13
7
4
2
All wage subsidy programmes*
Ending Q2 2020
Ending Q3 2020
Ending Q4 2020
Ending Q2 2021
Ending Q1 2021
Ending Q3 2021
Ending Q4 2021
0
Most wage subsidies are coming to an end…
*includes programmes where information on end date available
End date of 36 wage subsidy programmes globally
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 quicklyBy year-end RPKs only 1/3 of normal levels and yields down sharply
Source: IATA Economics
-100%
-80%
-60%
-40%
-20%
0%
20%
Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20
% c
ha
ng
e y
ea
r-o
n-y
ea
r
Global RPK growth
Julyforecast
September forecast
-55%
-68%
Growth rate in Dec
Airlines unable to downsize fleet proportionatelyShort-haul flying requires a higher proportion of the aircraft fleet
Source: IATA Economics analysis based on data from Cirium Ascend
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20
Nu
mb
er
of
air
cra
ft
Commercial airlines' fleet of jets and turboprops
In service
In storage
-23%
The challenge is to downsize costs sufficientlyMany costs are hard to avoid as we saw in the 2020Q2 results
Source: IATA Economics analysis based on data from the Airline Analyst
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
Passenger Cargo Total revenue Total costs Fuel Infrastructure
charges
MRO Labour
% c
ha
ng
e y
ea
r-o
n-y
ea
r
Operating revenues and costs changes in 2020 Q2
Cash burn was probably at its greatest in 2020 Q2Cash ($51bn) drained by unavoidable costs, debt interest and refunds
Source: IATA Economics analysis
Cash burn continuing during 2020 H2 by $77bnRevenues weak, Government aid diminishing, restructuring beginning
Source: IATA Economics analysis
Even after large cash raise many airlines at riskMedian airline’s cash would last just 8.5 months at H2 rate of cash burn
Source: IATA Economics using data from the Airline Analyst
Median airline
8.5 months of cash
0
5
10
15
20
25
1 2 3 4 5 6 7 8 9 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
Mo
nth
s
2020 end June cash+cash equivalents/2020 H2 monthly cash burn
Individual airlines
Airlines not expected to turn cash positive until 2022Extended weakness of revenues will delay financial turnaround
Source: IATA Economics analysis
-60
-50
-40
-30
-20
-10
0
2020Q2 2020Q3 2020Q4 2021Q1 2021Q2 2021Q3 2021Q4
$ b
illio
n d
uri
ng
qu
art
er
Airline industry quarterly cash burn forecast
