Moody’s Investor Services, the respected financial firm, has issued a new report on the beleaguered airline industry – and the end result is not pretty.
Moody’s says commercial aviation – and, as a result, the entire economy – will continue to suffer well into 2023 because of the current coronavirus pandemic.
And that’s a best-case scenario.
Worst case is, the industry doesn’t rebound to last year’s levels until 2024 or 2025.
Moody’s said that every stakeholder associated with aviation, from airlines and airports, to plane lessors, plane manufacturers, and parts suppliers, will be squeezed, with effects rippling across the entire global economy.
“And the outsourcing by airlines of many services, along with the significance of their employment rolls and consumption of refined petroleum in normal economic times, supports economic activity across many sectors of the global economy,” the analysts, led by Moody’s senior vice president Jonathan Root, wrote in the report.
The International Air Transport Association predicted airlines could lose $84 billion just this year.
The one unknown in the report is whether passenger demand will return. Currently, airlines are operating at just 75 percent of capacity, if not worse, as fliers hedge their bets on getting back in the air.
“Recent experience of increasing rates of infection concurrent with loosening social distancing and quarantine protocols indicates that passenger demand will likely align more with our slower recovery case,” the report said, “as social distancing and quarantine protocols are more likely to be maintained and/or revert to more restrictive mandates as infection rates rise again.”
The good news is that Moody’s believes the industry will indeed fully recover, whether that’s 2023 or beyond.
“Notwithstanding the harsh market environment we envision for the next several years, when passenger demand ultimately returns to 2019 levels, we believe the industry will then need almost as many aircraft as were in operation in 2019,” the report said. “With an effective coronavirus vaccine likely not available before well into 2021 – and likely longer to cover potential mutations of the virus and to ensure adequate dosage supply for the masses – additional government support will be required for the airline industry if employment levels are to be maintained near already reduced levels, and potentially to stave off additional airline restructurings and insolvency proceedings (whether preemptive, or otherwise).”
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