Global airlines to burn through $77bn of cash in second half of 2020, Iata says
An average airline has 8.5 months of cash left, underscoring the need for more government support or risk further job losses and bankruptcies, Iata says
Global airlines are expected to burn through another $77 billion of cash in the second half of 2020 as the decline in revenue outpaces cost savings and various government wage subsidy programmes start to expire.
The average carrier now has 8.5 months worth of cash left for operations, the International Air Transport Association (Iata) said in an online media conference on Tuesday. In the second quarter of the year, airlines used up an estimated $51bn of cash reserves as the Covid-19 pandemic decimated air travel demand.
"The issue now is that aid, particularly wage subsidies, is starting to be withdrawn,” Brian Pearce, chief economist of Iata, told reporters. Airlines are consuming cash as they are unable to reduce their biggest expenses: staff costs and fleet costs as airlines are flying predominantly short-haul routes that require more planes.
The rate of cash burn is expected to diminish to $5bn or $6bn a month in 2021 and airlines are not expected to turn cash-positive until 2022, Mr Pearce said.
Iata called on governments to extend or replace expiring wage subsidy programmes to support the pandemic-stricken aviation industry-- or risk further job losses and airline bankruptcies.
"We are burning through cash because we cannot cut costs fast enough to make up for the impact of not being able to do business—borders for the most part remain closed," Alexandre de Juniac, Iata's director general, told reporters.
"We continue to push for systematic testing on Covid-19 prior to departure," he added. "We believe that should give governments confidence to open borders."
Governments have provided airlines with a lifeline of more than $162bn and another $20bn to suppliers in financial support so far to survive the Covid-19 pandemic.
The call for increased support came amid warnings that the pandemic-induced downturn in air traffic could threaten 46 million jobs worldwide, according to a September 30th report by Air Transport Action Group.
Iata last week cut its 2020 air traffic forecast amid a second wave of Covid-19 outbreaks and travel restrictions that darkened the industry outlook.
"We're facing, we think, some tough winter months for airlines when cash flows are always seasonally weak," Mr Pearce said. "We're looking [at] airlines getting into trouble if not failing without either further government support or without airlines [being] able to access capital markets for more cash.”
The crisis is ongoing for longer and deeper with the coming months more challenging for airlines because they do not have the "cash cushion" from the traditionally stronger summer season, Mr de Juniac said.
Updated: October 6, 2020 07:09 PM