The International Air Transport Association (IATA) issued another stark warning on the health of the world’s airline industry, saying it will burn through US$77 billion in cash during the second half of 2020 as a result of the COVID-19 pandemic. The association said that works out to almost US$13 billion per month or US$300,000 per minute and comes despite the restart of operations in some domestic markets and a few international markets. IATA also said the slow recovery in air travel will see the airline industry continuing to burn through cash at an average rate of $5 billion to $6 billion per month in 2021.
IATA called on governments to support the industry during the coming winter season with additional relief measures, including financial aid that does not add more debt to the industry’s already-highly-indebted balance sheet. To date, governments around the world have provided US$160 billion in support, including direct aid, wage subsidies, corporate tax relief, and specific industry tax relief including fuel taxes.
Listen to the 6 October media call here.
Download the IATA analysis on cash burn here.
“We are grateful for this support, which is aimed at ensuring that the air transport industry remains viable and ready to reconnect the economies and support millions of jobs in travel and tourism,” said Alexandre de Juniac, IATA’s director general and CEO. “But the crisis is deeper and longer than any of us could have imagined. And the initial support programmes are running out. Today we must ring the alarm bell again. If these support programs are not replaced or extended, the consequences for an already hobbled industry will be dire.”
IATA estimated that despite cutting costs just over 50 percent during the second quarter, the industry went through US$51 billion in cash as revenues fell almost 80 percent compared to the year-ago period. The cash drain continued during the summer months, with airlines expected to go through an additional US$77 billion of their cash during the second half of this year and a further US$60 billion-US$70 billion in 2021. The industry is not expected to turn cash-positive until 2022.
Airlines have undertaken extensive self-help measures to cut costs. This includes parking thousands of aircraft, cutting routes and any non-critical expense and furloughing and laying off hundreds of thousands of experienced and dedicated employees.
“Government support for the entire sector is needed,” de Juniac added. “The impact has spread across the entire travel value chain including our airport and air navigation infrastructure partners who are dependent on pre-crisis levels of traffic to sustain their operations. Rate hikes on system users to make up the gap would be the start of a vicious and unforgiving cycle of further cost pressures and downsizings. That will prolong the crisis for the 10 percent of global economic activity that is linked to travel and tourism.”
There will be little appetite among consumers for cost increases. In a recent IATA survey, some two-thirds of travellers have already indicated that they will postpone travel until the overall economy or their personal financial situation stabilises. “Increasing the cost of travel at this sensitive time will delay a return to travel and keep jobs at risk,” said de Juniac.
According to the latest figures from the Air Transport Action Group, the severe downturn this year, combined with a slow recovery, threatens 4.8 million jobs across the entire aviation sector. Because each aviation job supports many more in the broader economy, the global impact is 46 million potential job losses and US$1.8 trillion dollars of economic activity at risk.
For Editorial Inquiries Contact:
Editor Matt Driskill at matt.driskill@asianaviation.com
For Advertising Inquiries Contact:
Head of Sales Kay Rolland at kay.rolland@asianaviation.com
