Air industry faces financial crisis as pandemic wipes out profitable summer season
IATA calls for continued government aid, saying passenger airlines make the bulk of their profits in warmer months.
An airline industry trade group is calling on governments around the world to continue providing relief measures as the Covid-19 crisis continues, saying airlines need a lifeline as they face expected losses of $84.3 billion in 2020 alone.
The timing of the pandemic has amplified its financial impact, since many western nations have continued to impose strict business closures through the spring and summer. That is a problem because the bulk of airlines make their money in the northern summer season, while the winter season is a struggle to remain profitable even in the best of times, according to the International Air Transport Association (IATA).
Even if travel bans and stay at home policies ended tomorrow, customers would continue to avoid airports, IATA said. The group cited public opinion research in the first week of June that shows greater caution among travelers in returning to travel: only 45% of travelers surveyed intend to return to the skies within a few months of the pandemic subsiding, while a further 36% said that they would wait six months.
The research applies to passenger travel, but the business shock would affect air cargo as well, since many airlines provide both services and even carry freight in the belly hold of passenger flights. If those are canceled, the freight can’t move.
“People are returning to the skies but the horizon of uncertainty of the COVID-19 crisis is extending,” Alexandre de Juniac, IATA’s director general and CEO, said in a release. “Forward bookings are down, and people are hedging their travel bets by booking closer to the time of travel. Airlines in the Northern hemisphere rely on a strong summer season and a predictable booking curve to get them through the lean months. But neither of these conditions are in place and airlines will need continued help from governments to survive a hard winter.”
IATA highlighted four keys areas where it said governments could assist airlines:
- extending the waiver from the 80-20 use-it-or-lose-it rule in the Worldwide Airport Slot Guidelines, where airlines lose their reserved space at airports unless they complete a threshold number of flights,
- continued financial assistance in ways that do not increase industry debt levels, such as subsidizing domestic operations or waiving airport and air traffic control charges,
- extensions to wage subsidies and corporate taxation relief measures, such as value added taxes (VAT), passenger taxes, or fuel taxes, and
- avoiding increases in charges and fees, including government coverage of the costs of Covid-19 health measures.
#Airlines face hard winter season amid uncertainty in the normally profitable northern summer season.@IATA has called on govts around the world to continue providing relief measures as the #COVID19 crisis continues. #aviation
— IATA (@IATA) June 16, 2020
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