The global industry body warned that the airline sector will burn through billions in cash in the second half of this year, despite a restart in operations
The International Air Transport Association (IATA) has warned that the airline sector faces a “looming cash crisis” caused by the slow recovery of air travel.
The trade association predicts that despite the restart in operations, the sector will burn through $77bn in cash during the second half of 2020 – which equates to almost £13bn a month or $300,000 per minute.
IATA is calling on governments to support the industry during the coming winter season, with additional relief measures, including financial aid that doesn’t add more debt to an already highly indebted industry.
To date, administrations around the world have provided a total of $160bn in support, including direct aid, wage subsidies, and corporate tax relief including fuel taxes.
Alexandre de Juniac, IATA’s director general and CEO, commented: “We are grateful for this support, which is aimed at ensuring that the air transport industry remains viable and ready to reconnect the economies and support millions of jobs in travel and tourism. But the crisis is deeper and longer than any of us could have imagined. And the initial support programs are running out. Today we must ring the alarm bell again. If these support programs are not replaced or extended, the consequences for an already hobbled industry will be dire.”
Juniac points to the summer season as being when airlines historically build up cash reserves to see them through the winter. This year, they have not been able to do this because of the COVID-19 pandemic and its resulting travel restrictions.
“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,” added de Juniac.
IATA estimates that despite cutting costs just over 50% during the second quarter, the industry went through $51bn in cash as revenues fell almost 80% compared with a year ago. A further $60-70bn is expected to be spent during 2021 and the sector isn’t expected to turn cash positive until 2022.