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Airlines face bankruptcy amid Covid-19 disruption, says IATA

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The International Air Transport Association (IATA) has said that airlines around the world
are losing an average of $13 billion monthly.

This could force major carriers in the industry into bankruptcy, it said.

The Director-General and Chief Executive Officer of IATA, Alexandre de Junaic, said with traffic
levels set to remain stunted through next year, airlines will continue to spend so much
money next year, at a rate of $5 to $6 billion monthly.

In its estimates for revenue passenger-kilometers, the airline association expects December
traffic levels to be 68 per cent lower than last year, against a 55 per cent reduction that it
forecast in July.

The global body does not see the sector profitability returning until 2022.

The Director-General described the crisis as a long time one and deeper than industry
players imagined. He noted that while examining available cash and liquid assets of carriers
in their six-month reports to the end of June, IATA found that an average airline had enough
funding to last just eight-and-a-half months, taking them halfway through February 2021.

Junaic said many carriers that are unable to raise cash from the markets face running out of
liquidity far soon than that.

“The heart of the problem is that while carriers have seen their revenue fall by around 80 percent, costs have declined only 50 per cent, as aircraft and staff cost are difficult to reduce, this is why airlines are burning through cash and still making significant losses,” he noted.

The body noted that government support for the entire sector is needed, and that the
impact has spread across the entire value chain including airport and air navigation
infrastructure partners who are dependent on pre-crisis levels of traffic to sustain their
operation.

IATA estimates that failure to invest in the sector not only threatens the aviation industry,
but the 10 percent of global economic activity that is linked to it.

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