Ticket refunds to cost airlines $35bn in Q2

Demand for air travel in Q1 could drop by 71%

Alexandre de Juniac
Alexandre de Juniac

The International Air Transport Association (IATA) has issued another report on the spiralling state of the aviation industry, highlighting that in Q2 alone, airlines are expected to spend US$35 billion in ticket refunds.

IATA has estimated that in Q2, airlines across the world could spend $61 billion of their cash reserves to counteract issues caused by COVID-19. IATA added that demand for air travel in Q1 could drop by 71% as flights are grounded.

IATA said airlines could post a quarterly net loss of $39 billion for the second quarter of the year, which ends on 30 June 2020. In a situation where travel restrictions last for three months, full-year demand is projected to fall by 38%, with revenues plummeting by $252 billion compared to last year.

“Airlines cannot cut costs fast enough to stay ahead of the impact of this crisis, said, IATA’s director general and CEO Alexandre de Juniac.

“We are looking at a devastating net loss of $39 billion in the second quarter. The impact of that on cash burn will be amplified by a $35 billion liability for potential ticket refunds. Without relief, the industry’s cash position could deteriorate by $61 billion in the second quarter.”

The UAE government recently announced it would inject equity into Emirates Airline to save it from succumbing to the financial consequences of coronavirus.

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