IATA estimates US$252 billion loss for world’s airlines

Avatar for Lisa GordonBy Lisa Gordon | March 24, 2020

Estimated reading time 3 minutes, 8 seconds.

According to the International Air Transport Association (IATA), China’s domestic air travel market is showing signs of recovery as health officials seem to have put a lid on the COVID-19 virus, which first appeared in that country in December 2019.

Alvin Man Photo
Just last week, IATA said that only 30 airlines worldwide are poised to survive the current COVID-19 crisis. Alvin Man Photo

IATA, which represents almost 300 airlines around the world including Air Canada, Air Transat, Cargojet and WestJet, said on March 24 that passenger yields for domestic Chinese flights have shown promise over the first two weeks of March and the association believes a “turning point” may have been reached.

The news was one bright spot as the rest of the world battles the virus.

“We’ve seen a dramatic increase in the number of travel restrictions,” said IATA chief economist Brian Pearce. “In effect, it has closed down international aviation and covers 98 per cent of passenger revenues.”

Two weeks ago, IATA released a so-called “worst-case scenario” that Pearce said has now been overtaken by events.

“The previous estimate was that passenger revenues would be down US$113 billion or 19 per cent. Now, we’re estimating a loss of US$252 billion which is something like 44 per cent down from 2019 levels. Clearly, this is a tremendous revenue shock.”

In previous pandemic scenarios, Pearce said the industry has typically hit bottom three months after the crisis erupts, with a return to pre-crisis levels about three to four months after that.

“The difference here is that it has spread globally and that will extend the crisis. More importantly, we’ve never seen a pandemic combined with the deep global recession that is now expected. Once travel restrictions are lifted, that will delay the recovery.”

IATA said predictions indicate a strong 2021 economic recovery on the backs of the fiscal stimulus packages being implemented by governments around the world. Central banks are also extending credit lines and loan guarantees.

“The challenge though is that recovery is unlikely to come very quickly. In the meantime, we’re faced with a sharp downturn,” said Pearce.

IATA estimated last week that there are only 30 airlines in the world with enough funds to survive the coming months.

“In terms of the cash available, the median airline had about two months of cash or cash equivalent at the start of this year,” Pearce pointed out. “Before any recovery takes place, airlines may well run out of cash.”

IATA renewed its call for decisive government and supplier intervention to preserve the airline industry during this liquidity crisis.

As well, the association asked governments to prioritize air cargo shipments to ensure the continued movement of vital goods through the world’s supply chains.

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