in Business & Finance

IATA: Airlines continue to burn through cash

Posted 6 October 2020 · Add Comment

IATA’s CEO Alexandre de Juniac said during this week’s media briefing that airlines continue to burn through cash.

“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," said IATA’s CEO Alexandre de Juniac.  Image:  IATA

de Juniac said: “For the second half of the year we expect, on average, for airlines to burn through cash at about $300,000 per minute for a total of $77 billion. And that’s on top of the $51 billion cash burn in the second quarter.

“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.

“We believe that there is a solution. As we have spoken about in these briefings for the past few weeks, we continue to push for systematic testing for COVID-19 prior to departure. We believe that should give governments the confidence to re-open borders. We are advocating for that with governments, the health authorities, WHO and through ICAO. 

“In the meantime, however, the crisis is growing longer and deeper than anybody could have imagined. The months ahead are traditionally the weakest for airlines. Normally they survive on the cash cushion from the busy peak travel period in July and August. We did not get that boost this year.

“Airlines did receive $160 billion in support from governments. That was a lifeline. We would have seen many more bankruptcies and job losses without it. Now, most of those programs are ending. So it is time to ask governments to take extra measures to replace or extend them into the longer term. The potential for failures and job losses in the coming months is enormous. 

“Today I want to emphasise that this is not just an airline problem. We know that our airport and air navigation service partners are also struggling.

“They suffer from the same lack of demand that airlines do. And increasing their unit charges—passing the costs to other part of the value chain—to cover the gap is not an option. Remember, at the end of the value chain are consumers and they are price sensitive. Already two thirds of travelers say that they will postpone travel until their personal financial situation stabilises. Anything that makes travel more expensive in this environment will only delay the recovery and put jobs at risk. 

“Last week ATAG announced the scale of jobs at risk. Some 46 million jobs are in peril because people are not traveling. About 10% (4.8 million) of those are in the aviation industry. The rest are spread across jobs dependent upon global connectivity that only aviation can provide.

“My point today is that the enormity of what is happening to aviation has consequences far beyond the industry itself. And the means for financial sustainability in this long and deep crisis, is far beyond what the industry is capable of ensuring by itself.

“Governments must be actively involved in supporting the entire sector’s finances through this unimaginably difficult time. And they should do it knowing that 10% of global economic activity is related to travel and tourism. That depends on connectivity. So supporting the industry in these challenging times is an investment worth making.

“Only a financially viable industry will be able to accelerate a broad economic recovery when borders re-open. And, as I see it today, the sector will not be ready to do that without government support.”

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