IATA chief warns of $77 billion dollar hole for H2, 2020
The International Air Transport Association (IATA) has warned that the airline industry will burn through a massive US$77 billion in cash during the second half of 2020, despite the restart of aviation operations after lockdown.
Also, the slow recovery in air travel will see the airline industry continuing to burn through cash at an average rate of $5 to $6 billion per month in 2021, according to IATA.
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.
More government support needed
Alexandre de Juniac, IATA’s Director General and CEO, said: “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.
"But the crisis is deeper and longer than any of us could have imagined and the initial support programs 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 estimates that despite cutting costs just over 50% during the second quarter, the industry went through $51 billion in cash as revenues fell almost 80% compared to the year-ago period.
The industry is not expected to turn cash positive until late 2022, and that is providing Covid-19 is under control and a vaccine has worked and been widely disseminated.
Airlines have already undertaken extensive self-help measures to cut costs, which 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.
Alexandre 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% of global economic activity that is linked to travel and tourism,” said de Juniac.