American airlines’ net losses are likely to be more than $35 billion for 2020, accounting for more than 40 percent of global carriers’ losses, as the coronavirus pandemic resulted in the worst year in the history of aviation.
The size of the financial hole experienced by US airlines was calculated by analysts at data firm FactSet, as reported by CNBC on Friday. In a separate December report, FactSet said airlines were the largest contributor to the year-over-year drop in the fourth quarter for the industrials sector, posting a 343 percent and a 66 percent decline in earnings and revenues, respectively. If they were excluded from the sector’s performance, the estimated earnings decline for it would improve to -0.7 percent from -34.4 percent, while the estimated revenue losses would be cut to -2.8 percent from -10.3 percent.
Despite some improvements in passenger traffic compared to the standstill seen in spring, the last three months of the year were still far from normal and are unlikely to bring profits to the troubled industry. According to the US Department of Transportation, American carriers had three consecutive quarterly losses this year, after more than six years of quarterly after-tax net profits. In the third quarter alone, the losses hit $11.8 billion, $800 million more than in the previous three months.
The International Air Transport Association (IATA) previously projected that the global air transport industry is likely to suffer a whopping annual loss of $84.3 billion as the result of the Covid-19 pandemic. Most of the losses were expected to be borne by carriers in North America.
“Financially, 2020 will go down as the worst year in the history of aviation,” said Alexandre de Juniac, IATA’s Director General and CEO, in a statement.
The agency still expects that mass vaccination will be a key to recovery, although executives warned that it could take years for the business to fully get back to normal. According to the IATA forecast, the losses can decrease more than fivefold in 2021 to $15.8 billion.
After the expiration of the first massive US government bailout, which brought $25 billion in support for the carriers, the companies furloughed thousands of people. The recently signed second stimulus bill earmarked additional $15 billion to support the industry, requiring the companies to recall employees furloughed last fall.
While airlines have already started the complicated process and are set to recall some 32,000 workers, the improvement in the key sector’s employment could be “temporary,” United executives warned, as travel demand is still far from full recovery.
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