Alexandre de Juniac
Photo by: Iata
The International Air Transport Association (Iata), the representative body of the global airline industry, has urged governments to continue supporting airlines through the coming northern winter season. This is because the world’s airlines are forecast to burn up cash totalling $77-billion during the second half of this year – a rate equivalent to $13-billion a month or $300 000 a minute. Moreover, the slow recovery of the sector means that airlines will continue to burn up cash next year, at an average rate of $5-billion to $6-billion a month, for a total amount for 2021 of $60-billion to $70-billion. Commercial aviation is now not expected to achieve positive cash flow until 2022.
So far, around the world, governments have provided airlines with support worth $160-billion. This has included corporate tax relief, sector-specific tax relief (such as fuel taxes), direct aid and wage subsidies. Iata is, however, calling for future aid to be structured in such a way that it does not add to airlines’ debt burdens. The sector is already highly indebted.
“[T]he crisis is deeper and longer than any of us could have imagined. And the initial support programmes are running out,” highlighted Iata director-general and CEO Alexandre de Juniac. “Today we must ring the alarm bell again. If these support programmes 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,” he pointed out. “Unfortunately, this year’s disastrous spring and summer provided no cushion. In fact, airlines burned cash throughout this period. And with no timetable for governments to reopen borders without travel-killing quarantines, we cannot rely on a year-end holiday season bounce to provide a bit of extra cash to tide us over until the spring.”
The aviation industry cut its costs by a little more than 50% during the second quarter of this year. Thousands of airliners have been parked, non-critical expenses cut, routes abandoned, and hundreds of thousands of staff laid-off or furloughed. But the industry still burnt up cash totalling $51-billion, because revenues fell by 80% compared to the same period last year.
“Government support for the entire sector is needed,” he urged. “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’s linked to travel and tourism.”