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Moody’s: Airline Industry May Not Recover Until 2023

Moody’s: Airline Industry May Not Recover Until 2023
Joe Cortez

Investor analysis and research firm Moody’s says the airline industry may continue to suffer for the next two years, as they have been “disproportionally affected” by the COVID-19 pandemic. The lack of passenger demand could also affect other industries, including airports, aircraft manufacturers and other service providers.

Moody’s Investors Service warns that the international aviation industry could be in for dark days ahead, as the entire industry may not recover to pre-pandemic numbers until 2023. In their most recent report, the research firm notes that an airline recession could create a domino-effect in other global industries.

Tourism Only One Aspect of Aviation Industry Cash Flow

The lack of travelers boarding commercial aircraft is certainly creating trouble for airlines. In the last quarter alone, Delta Air Lines said airfare sales were down 60 percent compared to the same time in 2019.

However, passenger spending is only one aspect of the aviation industry. According to Moody’s, several industries could be affected by a continued depression in the airline sector, including outsourced airport services and petroleum refineries for aircraft fuel.

“Passenger demand for air travel drives demand for key stakeholders in the aviation industry, including airport operators, aircraft leasing companies and aircraft manufacturers, as well as a multitude of service providers that keep airlines and airports running,” Moody’s senior vice president Jonathan Root said in a press release. “We expect that each of these stakeholders will be significantly impacted for at least the next three years, with 2020 declines for their products and services anticipated to be in the 40- to 50 percent range, if not higher.”

When will passenger loads (and airline services) come back to normal? With the current trajectory of the COVID-19 pandemic, Moody’s says it may not be until 2023 before we see passenger demand numbers close to 2019. But the research firm warns that if local and state governments can’t balance protection measures with reduced confirmed cases, the recovery may take longer.

“The rating agency cautions that with the recent increasing rates of infections in the U.S. that followed loosening of social distancing and quarantine protocols, passenger demand may ultimately align with its slower recovery case,” the analysis reads. “Or worse, if governments enforce social distancing and reinstate quarantine protocols because of the recent increasing infection rates.”

Depressed Outlook Comes as Airlines Prepare to Cut Staff

Moody’s projections for the aviation industry comes as airlines report some of their biggest losses, and prepare to cut staff. The first of the reporting airlines, Delta Air Lines, announced a $7 billion loss in the June quarter, driven by the lack of passengers.

The losses are forcing airlines to trim their employment numbers as they try to preserve cash on hand. American Airlines sent 25,000 layoff notices to their staff, while United Airlines sent over 30,000 to their current workforce.

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