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Airline industry to burn through $77bn in cash during second half of 2020 – IATA

Airline industry to burn through $77bn in cash during second half of 2020 – IATA

IATA urged governments to support the industry during the coming winter season with additional relief measures, including financial aid

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The global airline industry will burn through $77bn in cash during the second half of 2020 (almost $13bn per month or $300,000 per minute), despite operations restarting, the International Air Transport Association (IATA) has warned.

It estimates that despite cutting costs by just over 50 per cent during the second quarter, the industry went through $51bn in cash as revenues fell almost 80 per cent compared to the year-ago period.

With slow growth in summer, the industry is anticipated to see further depletion of its cash reserves.

“Historically, cash generated during the peak summer season helps to support airlines through the leaner winter months,” said Alexandre de Juniac, IATA’s director general and CEO.

“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, we cannot rely on a year-end holiday season bounce to provide a bit of extra cash to tide us over until the spring,” he added.

To date, governments around the world have provided the airline industry with $160bn in support, including direct aid, wage subsidies, corporate tax relief, and specific industry tax relief including fuel taxes.

However, IATA urged governments to support the industry during the coming winter season with additional relief measures, including financial aid to avoid adding more debt.

“We are grateful for this support… but the crisis is deeper and longer than any of us could have imagined. And the initial support programmes are running out,” the IATA CEO said.

“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.”

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 employees.

According to the latest figures from the Air Transport Action Group, the downturn this year, combined with a slow recovery, threatens 4.8 million jobs across the entire aviation sector. On the broader economy, the global impact is anticipated to be 46 million potential job losses and $1.8 trillion dollars of economic activity at risk.

“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,” said de Juniac.

“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 per cent of global economic activity that is linked to travel and tourism,” he added.

In a recent IATA survey, some two thirds of travellers indicated that they will postpone travel until the overall economy or their personal financial situation stabilises.

“Increasing the cost of travel at this sensitive time will delay a return to travel and keep jobs at risk,” said de Juniac.

Looking ahead, IATA also cautioned about sluggish growth next year due to the slow pace of recovery in air travel.

The airline industry will burn through cash at an average rate of $5bn to $6bn per month in 2021, amounting to a further $60-70bn during the year.

The industry is not expected to turn cash positive until 2022.

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