Airlines face fierce headwinds

The global airline industry has been disproportionately affected by the coronavirus pandemic, and the strain on its once flourishing fundamentals will affect a broad swath of the world economy well into 2022 and beyond, Moody's Investors Service says in a new report. The industry is one of just a few that saw demand drop by more than 90% within weeks of the onset of the crisis. While air travel itself is a key facilitator of tourism spending, the outsourcing by airlines of many services, along with significant employment and fuel consumption in normal economic times, similarly supports economic activity across many sectors. "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," said Jonathan Root, a senior VP of Moody's. "We expect 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% range, if not higher." As passenger traffic eventually improves, airports will recover first along with airlines, followed by aircraft lessors and then aircraft manufacturers. The broad base of global suppliers that feed the aircraft manufacturers will be the last to regain their footing, but not before 2023, according to Moody's. In terms of demand recovery, Moody's models anticipate a recovery in passenger demand close to 2019 levels by the end of 2023, once the concerns related to personal health and safety are relieved. Passenger airlines supported about 3% of world GDP in 2019, according to the International Air Transport Association (IATA). Airline cargo operations materially bolster international trade, with movement of more than $5 trillion of goods in 2019.<br/>