The global airline industry is extremely vulnerable to the economic effects of Covid-19, or the cornavirus disease, a recently released analysis by the International Air Transport Association (Iata) 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’ 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 the 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 many 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 World Health Organisation – in adapting their operations to the challenges of the coronavirus. And we are [helping] – and will continue – [to help] 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 takeoff “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.”
Just 24 hours before releasing its latest analysis of the state of the industry, Iata had highlighted the importance of air cargo in helping countries fight the Covid-19 pandemic. And it had called on governments to take urgent steps to make sure that air freight would be available to continue to support the worldwide campaign against the coronavirus.
Air cargo was transported both by dedicated freighter aircraft and in the cargo holds of passenger aircraft, with a large proportion of it flown by airliners. But the global collapse in air passenger demand had resulted in many airliners being taken out of use and ‘parked’. This had very significantly reduced the available freight capacity.
Air freight has been transporting essential medicines, medical equipment, spare parts and components for such equipment, as well as maintaining global supply chains for time-sensitive operations. It has also been transporting food and other goods, bought online, thereby supporting various national social distancing and quarantine policies. Iata urged governments to ensure that air cargo would continue to be available to fulfil these missions.
“Over 185 000 passenger flights have been cancelled since the end of January,” stressed De Juniac. “With this, vital cargo capacity has disappeared when it is most urgently needed in the fight against Covid-19. The world’s fleet of freighter aircraft has been mobilised to make up this capacity shortfall. Governments must take urgent measures to ensure that vital supply lines remain open, efficient and effective.”