No chance for full recovery in airline sector before 2023: Moody’s Recent Report


The Airline passenger demand will remain strictly depressed in 2021 and there is no chance for significant recovery before 2023, according to Moody’s Investors Service.

Restrictions on international arrivals, health concerns, changes in corporate travel policies, and lower discretionary spending because of weaker GDP and unemployment will hold back air passenger demand into 2022, Moody’s said in its credit outlook.

Demand in 2023 could approach that of 2019 but the uncertain timing of the COVID-19 receding on a more permanent basis makes forecasting a challenge.

Many airlines liquidity have improved but at the cost of rising debt burdens. Stronger and state-supported airlines have significantly improved liquidity since the third month of 2020.

It is possible to have sufficient liquidity to survive on average for about 450 days at current low activity levels for rated airlines but for weaker airlines, this may be insufficient if groundings persist into 2021.

Two scenarios modeled by Moody’s, assuming a recovery by 2023 or later years. Most airlines will carry significantly more debt in 2023. The faster and slower recovery cases assume 2023 passenger volumes recover to around 95% and 85% of 2019 levels respectively.

The airlines Moody’s rate will carry on average 20% to 30% more debt in 2023 compared with 2019 with leverage on average 0.5 to 1.5 times higher.

13 airlines downgraded by Moody since May 25 and confirmed six. It positioned ratings for 22 airlines on review for demote in March. The capability of liquidity and the potential for the companies to retire the debt incurred to restore credit metrics through 2023 were key considerations in resolving the reviews.

Moody’s said that the industry will undergo substantial structural and permanent changes. The risks of denied boarding and the Health screening will affect travelers potentially ahead of the pandemic. Corporate travel is possible to be impaired into 2023. Governments may expect deeper carbon emissions reductions.

There will be more repercussions across the associated sectors, particularly commercial aerospace manufacturers and suppliers, airline service companies, airports, travel distributors and airline service companies.

The jet fuel providers will also be deeply affected and the carbon dioxide emissions will reduce by 750 million to 900 million tons over 2020-21, said Moody’s.


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