The head of global airline body the International Air Transport Association (IATA) is expecting the airline industry to emerge from the COVID-19 crisis smaller and more cautious, and doubts airlines will try to expand through acquisitions.
The airline industry has been crippled by the COVID-19 pandemic, which continues to leave many aircraft around the world grounded or flying near-empty as demand limps towards a recovery.
“It will be a smaller industry. We are not going to recover all the capacity,” IATA director general Willie Walsh said in a pre-recorded online interview broadcast this week. He cited the swathes of aircraft retired and employees laid off or placed on furlough.
“It will be a more cautious industry. I don’t expect to see M&A [merger and acquisition] activity, principally because people will be guarded about the cash they have,” he said.
Walsh, who is the former chief executive of Aer Lingus owner International Airlines Group (IAG), said that spending “valuable cash resources” would be “too risky” but he believes that there will be consolidation through airlines shrinking their operations and some failing.
“It’s going to take airlines time to repair their balance sheets,” he said.
IATA has forecast global travel demand to return to 2019, pre-pandemic levels in 2024.
While those airlines that survive will fill the gaps left by those that fail, they will have to be careful how quickly they rebuild, Walsh said, urging caution.
“Airlines are not going to be able to take the risk of operating unprofitable routes in the short term,” he told aviation consultant John Strickland.
However, Walsh does not believe that the crisis has undermined airline business models such as those for regional or low-cost carriers among others.
“Nothing has changed the competitive nature of this industry,” he said.
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