Story ID: GPiatacash10062020
IATA Warns About Airlines’ Growing Cash Crisis
By: Gregory Polek
Caption: Airlines stand to burn a total of $77 billion during the second half of the year.
Word Count: 417
The International Air Transport Association on Tuesday sounded another alarm about the world’s airlines’ ability to overcome accelerating cash burn, estimated now to total $77 billion during the second half of the year. According to IATA chief economist Brian Pearce, the median airline can operate for roughly 8.5 months with the cash it controls, a rapidly eroding position that marks only a modest improvement over the period before governments injected their first tranche of aid.

IATA estimates that despite cutting costs by just over 50 percent during the second quarter, the industry burned $51 billion in cash as revenues fell almost 80 percent compared with the same period in 2019. The cash drain continued during the summer months, added IATA, which projects that airlines will not turn cash positive until 2022.

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

Once again IATA called on governments to help during the coming winter season with additional relief measures, including financial aid “that does not add more debt to the industry’s already-highly-indebted balance sheet.” Governments around the world already have provided $160 billion in support, including direct aid, wage subsidies, corporate tax relief, and specific industry tax relief including fuel taxes.

“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,” said de Juniac. “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.”

According to the latest figures from the Air Transport Action Group, the severe downturn this year, combined with a slow recovery, threatens 4.8 million jobs across the entire aviation sector. Because each aviation job supports many more in the broader economy, the crisis threatens 46 million potential job losses and puts at risk $1.8 trillion dollars of economic activity, concluded IATA.