Rough landing: 2020 will be a terrible year for air transportation | Article – HSBC VisionGo

The unprecedented slump in international travel will make 2020 a terrible year for the air transportation industry.


Figure 2: Global demand in passenger and freight air traffic (monthly data)
Sources: IATA, FactSet, Euler Hermes, Allianz Research

The year 2020 is expected to be an annus horribilis for the air industry. Our calculations made using a panel of around 80 major airlines show a collapse in revenues of more than USD300bn and a tumble in operating income of more than USD100bn in 2020. Even worse, the operating loss could top a terrible USD60bn this year (see Figure 3). We expect the air sector to retrieve USD205bn and USD75bn of revenues in 2021 and 2022, respectively, following the recovery in the world economy and international tourism. However, this will not make up for all the lost sales in 2020 alone.   

 Figure 3: sales and operating income of the air transport sector

Sources: IATA, FactSet, Allianz Research, Euler Hermes calculations

Though lockdowns are now gradually being lifted around the world and borders are starting to re-open, our central scenario[1] anticipates a progressive exit lasting another six months, leading to a U-shaped recovery in 2021. Combining this GDP trend with historical air traffic data and airlines’ poor activity in the first half of 2020, we find that global demand in air transport will not return to its pre-crisis level before 2023