GLOBAL – The International Air Transport Association (IATA) warned that the airline industry will lose $77 billion in cash during the second half of 2020 despite the restart of air transport in many regions of the wold.
According to IATA, the slow recovery in air travel will see the airline industry continue to burn through cash at an average rate of $5 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 $160 billion in support, including direct aid, wage subsidies, corporate tax relief, and specific industry tax relief including fuel taxes.
“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.”
Alexandre de Juniac – IATA’s Director General and CEO.
Juniac however noted that the crisis is deeper and longer than any of us could have imagined. And the initial support programs are running out.
He added that if the support programs provided by governments are not replaced or extended, the consequences for an already hobbled industry will be dire.
Historically, cash generated during the peak summer season helps to support airlines through the leaner winter months.
Unfortunately, this year’s disastrous spring and summer provided no cushion. In fact, airlines burned cash throughout the period.
And with no timetable for governments to reopen borders without travel-killing quarantines, the aviation industry cannot rely on a year-end holiday season bounce to provide a bit of extra cash to tide us over until the spring.
IATA estimates that despite cutting costs just over 50% during the second quarter, the industry only recorded a US$51 billion in cash as revenues, an 80% decline compared to the year-ago period.
The cash drain continued during the summer months, with airlines expected to go through an additional $77 billion of their cash during the second half of this year and a further $60-70 billion in 2021.
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.
Despite of these efforts, IATA does not see the aviation industry reporting a cash positive until 2022 partly because of little appetite among consumers for cost increases.
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 $1.8 trillion dollars of economic activity at risk.
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