Economic hit to airlines worsens to $314bn
IATA has once again updated its projections for the industry, set to see a 55% drop in revenues
The International Air Transport Association (IATA) has released updated projections on the economic impact of COVID-19 on the global aviation industry. In a scenario where travel restrictions are upheld for three months, passenger revenues would drop by 55% compared to last year, equating to a loss of US$314 billion in revenue.
The estimation comes a few weeks after IATA said the industry would see a $252 billion loss and 44% decline. The Association has said the updated figures reflect a “significant deepening of the crisis since then”, while also reinforcing other fears in the industry.
IATA explained that the developing situation points towards severe domestic restrictions lasting for three months, with international restrictions lasting beyond that. IATA’s analysis suggests the world is heading for recession, with Q2 2020 global GDP this year expected to shrink by 6% and aviation passenger demand to shrink by 8%.
“The industry’s outlook grows darker by the day. The scale of the crisis makes a sharp V-shaped recovery unlikely. Realistically, it will be a U-shaped recovery with domestic travel coming back faster than the international market. We could see more than half of passenger revenues disappear. That would be a $314 billion hit. Several governments have stepped up with new or expanded financial relief measures but the situation remains critical. Airlines could burn through $61 billion of cash reserves in the second quarter alone. That puts at risk 25 million jobs dependent on aviation. And without urgent relief, many airlines will not survive to lead the economic recovery,” said IATA director general and CEO Alexandre de Juniac.
As it has highlighted in its previous reports on the virus, IATA has said world governments must do more to support the struggling industry. Initiatives such as direct financial support, loans and tax relief will do a lot to support the aviation world.
“Financial relief for airlines today should be a critical policy measure for governments. Supporting airlines will keep vital supply chains working through the crisis. Every airline job saved will keep 24 more people employed. And it will give airlines a fighting chance of being viable businesses that are ready to lead the recovery by connecting economies when the pandemic is contained. If airlines are not ready, the economic pain of COVID-19 will be unnecessarily prolonged,” said de Juniac.