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Financial|Health|transport|Operations
Financial|Health|transport|Operations
financial|health|transport|operations

Iata urges decisive government action to shore up fragile global air transport sector

18th March 2020

By: Rebecca Campbell

Creamer Media Senior Deputy Editor

     

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The global airline industry is extremely vulnerable to the economic effects of the Covid-19 virus, an analysis released by the International Air Transport Association (Iata) on Wednesday has shown. Iata chief economist Brian Pearce highlighted that, of all the airlines in the world, only some 30 were actually profitable.

Excluding these 30 profitable carriers, airlines were suffering from high levels of balance sheet debt. Most airlines were short of cash to cover their expenses – 75% of them had less than three months worth of cash in reserve.

Airlines also had short-term liabilities that had to be serviced or repaid. Cash and receivables as a ratio of short-term (less than one year maturity) loans and bonds came to 0.8 for Middle Eastern and North American airlines, 0.7 for European airlines, 0.6 for Asia-Pacific airlines, and 0.5 for African and Latin American airlines.

Putting everything together the “typical airline” had, at the start of this year, only two months of cash in hand. Airlines were now rapidly running out of cash.  

The rapid spread of Covid-19 meant that markets with ten or more confirmed cases of the disease accounted for 94% of global passenger revenues. Markets with more than 100 cases were responsible for 82% of global passenger revenues.

Particularly important markets were the US, responsible for 21.9% of global passengers and generating $200-billion in passenger revenues; the UK and European Union, together accounting for 25% of global passengers and passenger revenues totalling $169-billion; and China, with 18% of global passengers and passenger revenues of $98-billion. All of them had very far more than 100 confirmed Covid-19 cases.

“[L]et me reassure you that the global air transport industry is responsibly responding to this global pandemic,” assured Iata director-general and CEO Alexandre de Juniac. “We are not public health experts, but airlines are following the best advice of experts – including the WHO [World Health Organisation] – in adapting their operations to the challenges of the coronavirus. And we are – and will continue – helping in the response.”

Because of the fragility of the global airline industry, he reiterated his calls for governments to support the sector in various ways, such as reducing charges and levies, waiving regulations regarding airport landing and take-off “slots” and providing financial support. He cautioned that there was no “one size fits all” solution.

“Time is of the essence,” he urged. “Governments cannot take a wait-and-see approach. We have seen how dramatically the situation has deteriorated globally in a very short time. They must act now and decisively. … [C]onnectivity is crucial. The world will get through this crisis. And when it does it will need a functioning air transport sector. Without financial relief that is not guaranteed.”

Edited by Creamer Media Reporter

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