COVID-19: IATA warns of airline revenue losses at US$314 billion for 2020 due to pandemic
The world’s leading trade body for international airlines said the current COVID-19 pandemic will see commercial airlines around the world lose a total of US$314 billion in revenues, a 55 percent drop from 2019’s revenues. The International Air Transport Association (IATA) had in March estimated US$252 billion in lost revenues in a scenario with severe travel restrictions lasting three months. The updated figures reflect a significant deepening of the crisis since then and reflect:
- Severe domestic restrictions lasting three months;
- Some restrictions on international travel extending beyond the initial three months;
- Worldwide severe impact, including Africa and Latin America (which had a small presence of the disease and were expected to be less impacted in the March analysis).
Full-year passenger demand (domestic and international) is expected to be down 48 percent compared to 2019, IATA said on a conference call on Tuesday (14 April).
“The industry’s outlook grows darker by the day,” said Alexandre de Juniac, IATA’s director general and CEO. “The scale of the crisis makes a sharp V-shaped recovery unlikely. Realistically, it will be a U-shaped recovery with domestic travel coming back faster than the international market. We could see more than half of passenger revenues disappear. That would be a US$314 billion hit. Several governments have stepped up with new or expanded financial relief measures but the situation remains critical. Airlines could burn through US$61 billion of cash reserves in the second quarter alone. That puts at risk 25 million jobs dependent on aviation. And without urgent relief, many airlines will not survive to lead the economic recovery.”
IATA said in a statement released after the call that the world is heading for recession and the economic shock of the COVID-19 crisis “is expected to be at its most severe in Q2 when GDP is expected to shrink by 6 percent (by comparison, GDP shrank by 2 percent at the height of the global financial crisis in 2008-2009). Passenger demand closely follows GDP progression. The impact of reduced economic activity in Q2 alone would result in an 8 percent fall in passenger demand in the third quarter.
The trade association also said travel restrictions will deepen the impact of recession on demand for travel. The most severe impact is expected to be in Q2. As of early April, the number of flights globally was down 80 percent compared to 2019 in large part owing to severe travel restrictions imposed by governments to fight the spread of the virus. Domestic markets could still see the start of an upturn in demand beginning in the third quarter in a first stage of lifting travel restrictions. International markets, however, will be slower to resume as it appears likely that governments will retain these travel restrictions longer.
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IATA called on governments around the world to provide “stabilisation packages” for airline carriers because “airlines are at the core of a value chain that supports some 65.5 million jobs worldwide. Each of the 2.7 million airline jobs supports 24 more jobs in the economy”, IATA said.
“Financial relief for airlines today should be a critical policy measure for governments. Supporting airlines will keep vital supply chains working through the crisis. Every airline job saved will keep 24 more people employed. And it will give airlines a fighting chance of being viable businesses that are ready to lead the recovery by connecting economies when the pandemic is contained. If airlines are not ready, the economic pain of COVID-19 will be unnecessarily prolonged,” said de Juniac.
IATA proposes a number of relief options for governments to consider, including:
- 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 governments or central banks. The corporate bond market is a vital source of finance for airlines, 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.
De Juniac said there has been some positive on the lifting of “mobility restrictions”, mainly in Europe where some countries are opening, bit by bit, their economies and “we can all be encouraged by this.
“I must point out, however, that the easing of lockdown measures, as far as we have seen, does not include a re-start for aviation. And, individual country decisions cannot enable the restoration of international air services when other markets remain closed. Furthermore, China and South Korea, countries which have been successful in controlling the disease within their own borders, are now doubling down on international travel restrictions because they don’t want to risk importing a second outbreak,” de Juniac said.
Governments re-opening their economies must have confidence that the disease is also under control in the countries they do business with, de Juniac said, “otherwise they are not going to make travel easy or convenient. Passengers, business or leisure, will also need to have their confidence restored.”
De Juniac said “unilateral actions by states can shut down aviation as we have seen,” but “unilateral actions cannot restart aviation.” He said governments must work together to with the industry to re-start aviation when it is safe to do so.
“There is much more to learn about COVID-19. So, we don’t expect to see immediate re-start solutions from our efforts. What is important, however, is that we have the best minds in the world focusing together on solving the challenges that COVID-19 has brought to the global air transport system,” de Juniac said.