Airline Debt to Balloon by 28%
|
2019 Revenues ($ billion) |
Aid promised ($ billion) |
% of 2019 Revenues |
Global |
$838 |
$123 |
14% |
North America |
$264 |
$66 |
25% |
Europe |
$207 |
$30 |
15% |
Asia-Pacific |
$257 |
$26 |
10% |
Latin America |
$38 |
$0.3 |
0.8% |
Africa and Middle East |
$72 |
$0.8 |
1.1% |
There are still large gaps in the financial aid needed to help airlines survive the COVID-19 crisis. The US government has led the way with its CARES Act being the main component of financial aid to North American carriers which in total represented a quarter of 2019 annual revenues for the region’s airlines. This is followed by Europe with assistance at 15% of 2019 annual revenues and Asia-Pacific at 10%. But in Africa, the Middle East and Latin America average aid is around 1% of 2019 revenues.
“Many governments have stepped up with financial aid packages that provide a bridge over this most difficult situation, including cash to avoid bankruptcies. Where governments have not responded fast enough or with limited funds, we have seen bankruptcies. Examples include Australia, Italy, Thailand, Turkey, and the UK. Connectivity will be important to the recovery. Meaningful financial aid to airlines now makes economic sense. It will ensure that they are ready to provide job-supporting connectivity as economies re-open,” said de Juniac.
The Impact of Debt
The kind of aid provided will influence the speed and strength of the recovery. IATA urged governments still contemplating financial relief to focus on measures that help airlines raise equity financing. “Many airlines are still in desperate need of a financial lifeline. For those governments that have not yet acted, the message is that helping airlines raise equity levels with a focus on grants and subsidies will place them in a stronger position for the recovery,” said de Juniac.
“A tough future is ahead of us. Containing COVID-19 and surviving the financial shock is just the first hurdle. Post-pandemic control measures will make operations more costly. Fixed costs will have to be spread over fewer travelers. And investments will be needed to meet our environmental targets. On top of all that, airlines will need to repay massively increased debts arising from the financial relief. After surviving the crisis, recovering to financial health will be the next challenge for many airlines,” said de Juniac.
Last week, the IATA Board of Governors committed to five key principles for the industry re-start. Among these are commitments to the safety and security of staff and travelers, to meeting the industry’s environmental targets and to being a meaningful driver of the economic recovery with affordable connectivity.
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