The airline sector is one of the most affected by COVID19 as activity is paralysed. Furthermore, there is reduced visibility as to when the airlines will operate again. This situation means that several companies may face liquidity problems if it continues over time, which is why IATA is calling for specific aid.
The International Air Transport Association (IATA) estimates that losses to the passenger air transport sector will total $314 billion in 2020, due to the impact of the coronavirus crisis. This will lead to a 55% drop in revenue for airlines compared to 2019, as a result of the travel restrictions imposed by governments worldwide to curb the pandemic spread. In addition, the Association forecasts a 48% drop in passenger traffic in 2020 from a year earlier, which will impact the airlines results. Finally, IATA has warned that airlines could spend up to $61 billion of cash reserves in Q2’20 alone, putting 25 million aviation-dependent jobs at risk.
Given the impact of the crisis on the aviation sector and its consequences on tourism worldwide, IATA has called on governments to include the aviation industry in the aid packages for the pandemic. The association is seeking direct financial support for passenger and cargo carriers to compensate for the reduction in revenue and liquidity attributable to the travel restrictions. According to its estimates, each airline job saved will keep 24 more people employed, as airline support will keep vital supply chains running during the crisis.
Along these lines, the US has introduced a package of measures amounting to $25 billion against a backdrop of a 95% decline in air traffic. According to a statement from the Treasury Department, ten of the major US airlines have expressed their willingness to take advantage of the programme to cover payroll payments. Treasury Secretary Steven Mnuchin said the programme will support workers and help preserve the strategic importance of the airline industry. The measure is part of the $2 billion economic stimulus plan approved by the White House to cope with Covid-19.
The airline sector is facing a particularly adverse time, as COVID-19 comes on top of overcapacity and a global economic slowdown.