The global trade organisation for the world’s airlines said countries in the Asia-Pacific region need to provide more financial support for the airline industry as the COVID-19 pandemic worsens with more than 1 million people infected around the global and more than 50,000 deaths.
The International Air Transport Association (IATA) said major Asia-Pacific states could see passenger demand in 2020 reduced by between 34 percent to 44 percent, based on a scenario where severe restrictions on travel are lifted after three months, followed by gradual recovery. Cambodia (-34 percent), Vietnam (-34 percent) and the Philippines (-36 percent) will be on the lower end of the range, while Thailand (-40 percent), Pakistan (-40 percent), South Korea (-40 percent) and Sri Lanka (-44 percent) will see the largest impact, IATA officials said.
“Based on a scenario in which severe travel restrictions last for three months, the Asia-Pacific region as a whole will see passenger demand reduced by 37 percent this year, with a revenue loss of US$88 billion,” said Conrad Clifford, IATA’s regional vice president for Asia-Pacific. “While each country will see varying impact on passenger demand, the net result is the same – their airlines are fighting for survival, they are facing a liquidity crisis, and they will need financial relief urgently to sustain their businesses through this volatile situation.” In its latest analysis, IATA expects airlines to post a net loss of US$39 billion during the second quarter ending 30 June 2020. The impact of that on cash burn will be amplified by a US$35 billion liability for potential ticket refunds. Without relief, the industry’s cash position could deteriorate by US$61 billion in the second quarter.
Australia, New Zealand and Singapore have announced a substantial package of measures to support their aviation industry. “But others in the region, including India, Indonesia, Japan, Malaysia, the Philippines, Republic of Korea, Sri Lanka and Thailand, have yet to take decisive and effective action. Jobs as well as the GDP supported by the industry are at risk,” said Clifford. “Governments need to ensure that airlines have sufficient cash flow to tide them over this period, by providing direct financial support, facilitating loans, loan guarantees, and support for the corporate bond market. Taxes, levies, and airport and aeronautical charges for the industry should also be fully or partially waived. It is critical that these countries still have a viable aviation sector to support the economic recovery, connect manufacturing hubs and support tourism when the COVID-19 crisis is over. They need to act now – and urgently – before it is too late.”
Middle East and Africa need help too
IATA also called on governments in the Middle East and Africa to provide financial relief to airlines as the latest IATA scenario for potential revenue loss by carriers in Africa and the Middle East reached US$23 billion (US$19 billion in the Middle East and US$4 billion in Africa). This translates into a drop of industry revenues of 32 percent for Africa and 39 percent for the Middle East for 2020 as compared to 2019.
Some of the impacts at national level include:
- Saudi Arabia: 7 million fewer passengers resulting in a US$5.61billion revenue loss, risking 217,570 jobs and US$13.6 billion in contribution to Saudi Arabia’s economy.
- UAE: 8 million fewer passengers resulting in a US$5.36 billion revenue loss, risking 287,863 jobs and US$17.7 billion in contribution to the UAE’s economy.
- Egypt: 5 million fewer passengers resulting in a US$1.6 billion revenue loss, risking almost 205,560 jobs and around US$2.4 billion in contribution to the Egyptian economy.
- Qatar: 6 million fewer passengers resulting in a US$1.32 billion revenue loss, risking 53,640 jobs and US$2.1billion in contribution to Qatar’s economy.
- Jordan: 8 million fewer passengers resulting in a US$0.5 billion revenue loss, risking 26,400 jobs and US$0.8 billion in contribution to Jordan’s economy.
- South Africa: 7 million fewer passengers resulting in a US$2.29 billion revenue loss, risking 186,850 jobs and US$3.8 billion in contribution to South Africa’s economy.
- Nigeria: 5 million fewer passengers resulting in a US$0.76 billion revenue loss, risking 91,380 jobs and US$0.65 billion in contribution to Nigeria’s economy.
- Ethiopia: 6 million fewer passengers resulting in a US$0.3billion revenue loss, risking 327,062 jobs and US$1.2 billion in contribution to Ethiopia’s economy.
- Kenya: 5 million fewer passengers resulting in a US$ 0.54 billion revenue loss, risking 137,965 jobs and US$1.1 billion in contribution to Kenya’s economy.
To minimise the broad damage that these losses would have across the African and Middle East economies, it is vital that governments step up their efforts to aid the industry. Many governments in the region have committed to provide relief from the effect of COVID-19. And some have already taken direct action to support aviation including the United Arab Emirates. But more help is needed. IATA is calling for a mixture of direct financial support, loans, loan guarantees and support for the corporate bond market tax relief
“The air transport industry is an economic engine, supporting up to 8.6 million jobs across Africa and the Middle East and US$186 billion in GDP,” said Muhammad Al Bakri, IATA’s regional vice president for Africa and the Middle East. “Every job created in the aviation industry supports another 24 jobs in the wider economy. Governments must recognise the vital importance of the air transport industry, and that support is urgently needed. 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. Failure by governments to act now will make this crisis longer and more painful. Airlines have demonstrated their value in economic and social development in Africa and the Middle East and governments need to prioritise them in rescue packages. Healthy airlines will be essential to jump-start the Middle East and global economies post-crisis.”
IATA called for regulators to:
- Provide a package of measures to ensure air cargo operations, including fast track procedures to obtain overflight and landing permits, exempting flight crew members from 14-day quarantine, and removing economic impediments (overflight charges, parking fees, and slot restrictions).
- Provide financial relief on Airport and Air Traffic Control (ATC) Charges and Taxes
- Ensure aeronautical information is published, timely, accurately, and without ambiguity, ensuring the airlines can plan and execute their flights
“Some regulators are taking positive action. We are grateful to the Ghana, Morocco, the UAE, Saudi Arabic and South Africa for agreeing a full-season waiver to the slot use rule. This will enable airlines and airports greater flexibility for this season and greater certainty for summer. But there is more to do on the regulatory front. Governments need to recognise that we are in a crisis,” said Al Bakri.