IATA Warns Against Looming Bankruptcy For Airlines
The world’s airlines are haemorrhaging at the rate of about $300,000 per minute or $13 billion monthly, which could force large swathes of the industry into bankruptcy within months, the International Air Transport Association (IATA) has warned.
Its Director-General and Chief Executive Officer, Alexandre de Juniac, said with traffic levels set to remain stunted through next year, IATA said carriers will continue to burn cash next year, at a rate of $5 to $6 billion monthly – even assuming that a Covid-19 vaccine is discovered.
Lowering its estimates for revenue passenger-kilometres, the airline association expects December traffic levels to be 68 per cent lower than last year, against a 55 per cent reduction that it forecast in July. It does not see sector profitability returning until 2022.
Describing the crisis as growing longer and deeper than industry players imagined, Juniac said: “And the initial support programmes are running out. 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.”
Juniac said examining available cash and liquid assets of carriers in their six-month reports to the end of June, IATA found that on average airlines had enough funding to last just eight-and-a-half months, taking them to halfway through February 2021.
Juniac said many carriers that are unable to raise cash from the markets face running out of liquidity far sooner than that.
He said the number of airlines that have collapsed has so far been limited by around $160 billion in government support to the sector, such assistance has started to be withdrawn.
Juniac said : “ At the heart of the problem is that while carriers have seen their revenues fall by around 80 per cent , costs have declined only 50 per cent , as aircraft and staff costs are difficult to reduce. This is why airlines burning through cash and still making significant losses,
“Government support for the entire sector is needed . “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.”
IATA estimates that failure to invest in the sector not only threatens the aviation industry, but the 10 percent of global economic activity that is linked to it. According to statistics, aviation supports 46 million jobs across the world and $1.8 trillion in economic activity.