COVID-19's impact estimate on passenger revenue of airlines by region 2020

Given that the novel coronavirus (COVID-19) outbreak intensifies, annual estimates for the aviation industry adjusted. As of April 2021, annual passenger revenue in the Asia Pacific region was forecasted to decline by approximately 120 billion U.S. dollars from the previous year.

COVID-19 and the global aviation

Amid the coronavirus (COVID-19) pandemic, countries and organizations began to implement precautionary measures to contain the spread of COVID-19 for a public purpose. Some of the preventive methods included imposing lockdowns or encouraging no travel unless necessary by governments. Similarly, businesses adopted a multitude of strategies to cope with the challenge, such as avoiding business travels or minimizing them. When aggregated, these measures by the governments and businesses affected the aviation industry adversely. Starting from February 2020, the year-on-year revenue-passenger kilometer (RPK) change on international routes continued to decline, reaching roughly 99 percent of decline by April 2020. This decline implies an almost complete cancellation of air travel across the globe. Just like previous months, the enormous negative effect of COVID-19 on passenger aviation continues to persist as of September 2020. Consequently, airlines were desperately urged to request government aid. For instance, Lufthansa Group received over 12 billion U.S. dollars and Air France – KLM roughly 11.7 billion U.S. dollars in government bailout package. Despite all, the vulnerability of airlines perseveres as the coronavirus pandemic exposes the globe to the second wave of infections across countries.

Financial performance of airlines amid COVID-19

Due to the nature of business activity involved, airline groups usually hold fewer liquidity accounts in their asset portfolios. This tendency is especially the case for traditional airlines, although somewhat less true for low-cost carriers (LCCs). While analyzing the 2019 financial balance sheet data of European airlines, Lufthansa Group held only 12 percent of its global revenue in liquid assets, such as cash. Similarly, Air France-KLM around 22 percent of its revenue in liquid accounts. On the other hand, Wizz Air and Ryanair demonstrated the best liquidity accounts amongst all European airline groups, with over 47 percent of 2019 total revenue as liquid assets. The importance of liquid assets emerges when a business is in unexpected need to finance itself but does not have access to immediate finance capacities. For instance, a company with high illiquid asset portfolio firstly needs to liquidate its illiquid assets and then only be able to meet due business obligations. According to another analysis, Pakistan International and Precision Air have a high risk of collapse as of November 2020.