CORONAVIRUS: IATA says airlines could lose US$252 billion in revenues

Aviation faces ‘gravest crisis’ director general says in call for government aid; 'For airlines, it’s apocalypse now'

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A screenshot taken on 25 March showing the virus tracking site maintained by Johns Hopkins University.

The International Air Transport Association (IATA) is now saying airlines globally could lose as much as US$252 billion in revenues this year due to the continuing spread of the COVID-19 coronavirus. The trade association had in early March originally said airlines would lose up to US$113 billion if the viral spread continued for an “extended period”.

IATA’s previous analysis was made before countries around the world introduced sweeping travel restrictions that largely eliminated the international air travel market. IATA represents some 290 airlines comprising 82 percent of global air traffic.

Alexandre de Juniac, IATA’s director general. (PHOTO: IATA file)

“The airline industry faces its gravest crisis. Within a matter of a few weeks, our previous worst-case scenario is looking better than our latest estimates. But without immediate government relief measures, there will not be an industry left standing. Airlines need US$200 billion in liquidity support simply to make it through. Some governments have already stepped forward, but many more need to follow suit,” said IATA Director General and CEO Alexandre de Juniac.

A map of world travel restrictions. (PHOTO: IATA)

The latest analysis envisions that under this scenario, severe restrictions on travel are lifted after three months. The recovery in travel demand later this year is weakened by the impact of global recession on jobs and confidence. Full year passenger demand (revenue passenger kilometres or RPKs) declines 38 percent compared to 2019. Industry capacity (available seat kilometre or ASKs) in domestic and international markets declines 65 percent during the second quarter ended 30 June compared to a year-ago period, but in this scenario recovers to a 10 percent decline in the fourth quarter.

Government needs to step up on aid

IATA it was pleased that some countries have provided financial relief to the aviation market, but said more need to chip in to keep the industry flying.

“Airlines are fighting for survival in every corner of the world. Travel restrictions and evaporating demand mean that, aside from cargo, there is almost no passenger business. For airlines, it’s apocalypse now. And there is a small and shrinking window for governments to provide a lifeline of financial support to prevent a liquidity crisis from shuttering the industry,” said de Juniac.

“It did not seem possible, but in a matter of days, the crisis facing airlines worsened dramatically. We are 100 percent behind governments in supporting measures to slow the spread of COVID-19. But we need them to understand that without urgent relief, many airlines will not be around to lead the recovery stage. Failure to act now will make this crisis longer and more painful. Some 2.7 million airline jobs are at risk. And each of those jobs supports a further 24 in the travel and tourism value chain. Some governments are already responding to our urgent calls, but not enough to make up the US$200 billion needed,” said de Juniac.

In urging more government action, de Juniac cited examples of state support:

  • Australia has announced an A$715 million (US$430 million) aid package comprising refunds and forward waivers on fuel taxes, and domestic air navigation and regional aviation security charges.
  • Brazil is allowing airlines to postpone payments of air navigation and airport fees.
  • China has introduced a number of measures, including reductions in landing, parking and air navigation charges as well as subsidies for airlines that continued to mount flights to the country.
  • Hong Kong Airport Authority (HKAA), with government support, is providing a total relief package valued at HK$1.6 billion (US$206 million) for the airport community including waivers on airport and air navigation fees and charges, and certain licensing fees, rent reductions for aviation services providers and other measures.
  • New Zealand’s government will open a NZ$900 million (US$580 million) loan facility to the national carrier as well as an additional NZ$600 million relief package for the aviation sector.
  • Norway’s government is providing a conditional state loan-guarantee for its aviation industry totalling NKr6 billion (US$533 million).
  • Qatar’s Minister of Finance has issued a statement of support for the national carrier.
  • Singapore has undertaken relief measures valued at S$112 million (US$82 million) including rebates on airport charges, assistance to ground handling agents, and rental rebates at Changi Airport.
  • Sweden and Denmark announced US$300 million in state loan guarantees for the national carrier.

In addition to this support, the European Central Bank, and the United States Congress are expected to enact significant measures to aid the airline industry in their respective jurisdictions as part of large packages of broader economic measures.

“This shows that  states around the globe, recognise the critical role that aviation plays in the modern world. But many others have still to act to preserve the important role of this sector. Airlines are an economic and employment engine. This is demonstrated even as passenger operations shrink, as airlines continue to deliver cargo that is keeping the economy going and getting relief supplies where they are needed most. The ability for airlines to be a catalyst for economic activity will be vital in repairing the economic and social damage that COVID-19 is now causing,” said de Juniac.

IATA is calling for:

  • Direct financial support to passenger and cargo carriers to compensate for reduced revenues and liquidity attributable to travel restrictions imposed as a result of COVID-19;
  • Loans, loan guarantees and support for the corporate bond market by the Government or Central Banks. The corporate bond market is a vital source of finance, but the eligibility of corporate bonds for central bank support needs to be extended and guaranteed by governments to provide access for a wider range of companies.
  • Tax relief: Rebates on payroll taxes paid to date in 2020 and/or an extension of payment terms for the rest of 2020, along with a temporary waiver of ticket taxes and other government-imposed levies.

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