IATA warns of airline ‘apocalypse now’ as forecast revenue hit doubles

3
March 25, 2020
IATA
IATA Boss Alexandre de Juniac. Photo: IATA

The International Air Transport Association (IATA)  has warned airlines need $US200 billion in liquidity support as they face “apocalypse now” with forecast global passenger revenues plummetting as much as $US252 billion.

IATA’s latest estimate of the revenue hit airlines could suffer is more than double its previous estimate of $US113 billion, made on March 5 before the introduction of sweeping travel restrictions, and is 44 percent down on 2019 figures.

It is based on a scenario in which severe travel restrictions last for up to three months but are followed by a gradual economic recovery later in the year.

READ: Australia bans outgoing travel as some ignore warning.

But the airline umbrella group warned any recovery would be weakened by the impact of a global recession on jobs and confidence.

Hardest hit by the revenue slump in dollar terms will be airlines in the Asia-Pacific (down $US88 billion)  and Europe (down $US 76 billion), which also leads the fall in percentage terms.

IATA is also expecting full-year passenger demand to be 38 percent below 2019 with a 65 percent fall in capacity in the second quarter ended June 30.

“The airline industry faces its gravest crisis,” IATA director-general  Alexandre de Juniac said.

“Within a matter of a few weeks, our previous worst-case scenario is looking better than our latest estimates.

“But without immediate government relief measures, there will not be an industry left standing.

“Airlines need $200 billion in liquidity support simply to make it through. Some governments have already stepped forward, but many more need to follow suit.”

The airline group is calling for governments to provide direct financial support, loans or loan guarantees and tax relief to airlines.

The IATA chief said airlines were fighting for survival in every corner of the world as passenger demand evaporated.

He said governments needed to understand that without urgent relief many would not be around to lead the post-COVID-19 recovery, putting some 2.7 million airline jobs at risk

“For airlines, it’s apocalypse now,” he said

“And there is a small and shrinking window for governments to provide a lifeline of financial support to prevent a liquidity crisis from shuttering the industry.”

IATA cited examples of government support, including Australia’s $A715m ($US430m) aid package and Air New Zealand $NZ900m loan facility as well as relief measures in Brazil, China, Hong Kong, Qatar, Singapore and Scandinavia.

The European Union and the US are also expected to introduce significant measures to support the airline industry as part of broader economic packages.

“This shows that states around the globe, recognize the critical role that aviation plays in the modern world. But many others have still to act to preserve the important role of this sector,” de Juniac said.

“Airlines are an economic and employment engine. This is demonstrated even as passenger operations shrink, as airlines continue to deliver cargo that is keeping the economy going and getting relief supplies where they are needed most.

“The ability for airlines to be a catalyst for economic activity will be vital in repairing the economic and social damage that COVID-19 is now causing.”

However, the UK has baulked at an airline bailout, telling airlines it is only prepared to enter negotiations with individual companies as a last resort.

IATA’s forecast impact on passenger revenue by region:

Region of Airline Registration % Change in RPKs

(2020 vs. 2019)

Est. Impact on Pass. Revenue

2020 vs. 2019

(US$ billions)

 

Africa -32% -4
Asia-Pacific -37% -88
Europe -46% -76
Latin America -41% -15
Middle East -39% -19
North America -27% -50
Industry -38% -252