IATA’s Director General and CEO Alexandre de Juniac says the complexity of restarting air transport demonstrates how much the industry could change as a result of COVID-19
COVID-19 has had a global effect on the air transport industry, touching every country. Director General and CEO of IATA Alexandre de Juniac talks about the effects of the pandemic on the industry, what air travel may look like short term, and his hope for the future.
Where does the COVID-19 pandemic rank in terms of industry crises?
This is completely different to any other crisis the industry has faced. The scale of the impact is at least an order of magnitude more severe than anything we have experienced before.
And the damage is operational as well as financial. This is not only about the enormous economic hit but also the potential far-reaching effects on business models and operational processes. We have never faced a challenge like it.
Have governments fully understood the extent of the impact on aviation? What more can they do?
IATA has been in direct contact with governments around the world asking for rescue packages for the industry. They have responded with an open, supportive attitude and many have announced significant measures, including the United States and governments in Asia-Pacific and the Middle East.
There are three elements to our lobbying. First, we are asking for a softening of regulations, such as a waiver on slot rules and the ability to offer vouchers alongside refunds for cancelled flights.
Second, we are asking for all possible cost reductions, such as flight charges, parking fees for aircraft, and taxes. Most governments have answered this call.
Third, we need financial support of any kind. This might be a direct capital injection or government-backed loans or loan guarantees; and tax relief.
All these elements are aimed at getting cash on the balance sheet. The cash burn rate is unbearable. Airlines will get through more than $60 billion in the second quarter alone.
If we can’t get enough cash flowing, then the entire industry faces bankruptcy.
80%- Short haul needs about an 80% load factor to break even. If that is impossible to achieve then the consequences are enormous
How will the industry change following the crisis?
Certainly, some airlines will go bankrupt. That is inevitable. And for others to survive, consolidation will most likely happen around the larger carriers.
But how the industry will look will be largely dictated by how and when we restart the industry. And that is the major challenge facing us.
At the technical level, though it is a massive and complex project, we know what to do. We have the expertise and we can work through it.
But how to restart the market—stimulate demand, deal with new regulations, and evolving customer requirements—is far more difficult because we are dealing with unknowns.
Will health screening for COVID-19 need to be done at the departure or arrival airport or both, for instance? And will it be a simple temperature test or something more involved like a throat swab or blood test for immunity? Then we have to think about the equipment we may need to hand out to passengers, including masks, gloves or hand sanitizer. And if we need to maintain social distancing during travel, what will that mean for aircraft seating and for airport processes, such as the security checkpoint and boarding? Finally, there is the cleaning of aircraft. If that needs to be more extensive then turnaround times could be longer and schedules would need to change.
Individually, any of these factors would have a significant impact on previous operational practices. Taken together, we could be talking about a very different industry. We would not be restarting the same industry that was locked down.
Will governments or airlines take responsibility for these measures?
I think that will depend on the measure. Clearly, if we are talking about testing for COVID-19 at every airport, it will need to be done by governments. It involves specialists and specialist equipment and airlines can’t be expected to organize that.
Cleaning aircraft, on the other hand, is an area that airlines understand and can control.
But if we need to de-densify the aircraft—for example, by leaving the middle seat open in a row of three seats—that would be an immensely difficult business challenge that would need to be discussed. It would mean entirely new business models. Short-haul flights and low-cost carriers depend on volume. Short haul generally needs about an 80% load factor to break even. If that is literally impossible to achieve then the consequences are enormous.
Of course, one way out is for any measure to be temporary. Some or all these factors may not be permanent. It could be that within a year or two, we will get back to “normal.” But we can’t assume that. We will need some clarity on the duration of measures to make the right decisions.
How can airlines build in greater resilience to survive future challenges?
There are several points. Most obviously, we need to be much stronger in terms of cash reserves. Even when the industry was profitable, we kept emphasizing the overall structural weakness. Some airlines and some regions made up for shortfalls elsewhere. There needs to be a greater focus on being financially strong.
But aside from that, there are many areas to consider going forward. Airlines might decide to have reserves of equipment that limit the spread of a virus so that it can be rolled out at the first sign of a problem. We may need to update crew training to include more emphasis on areas such as hygiene. And we will learn lessons from all the other factors that may be involved in the restart of the industry.
$60 billion- Airlines will get through more than $60 billion in the second quarter alone.
What is IATA doing to help airlines through these exceptional times?
We are doing everything we can. As mentioned, we are lobbying governments worldwide to ensure airlines have enough cash to survive. That is the primary concern.
But we are also managing the BSP [Billing and Settlement Plan] as carefully as possible to protect everybody who uses it. That is a complex, day-to-day challenge. We have postponed IATA membership fees that were due in the second quarter and also deferred a number of other costs where possible.
We are practicing what we preach and trying to ensure airlines have access to as much cash as possible right now.
What do you think will be the most crucial IATA initiatives to help airlines through the recovery phase?
IATA’s key initiatives will show their worth in the recovery phase. Whether it is New Distribution Capability (NDC) or New Experience Travel Technologies (NEXTT), these initiatives have always had the customer and cost efficiency at their core. These drivers will be more important than ever.
But we have to get to the recovery phase first. Right now, lobbying governments to keep airline cash flowing and working out how to restart the industry is the most important work we are doing.
We are lobbying governments worldwide to ensure airlines have enough cash to survive. That is the primary concern
How important is it to keep the entire industry structure healthy, including ANSPs and airports?
We are advocating for the entire aviation value chain because that chain gets its strength from airlines. We have pointed out that 32 million jobs dependent on aviation are at risk, for example. And we acknowledge the help being given by air navigation service providers and airports.
We have to take the broader view because only together can we provide the connectivity that will help the global economy regain its strength. And only by working together can we overcome the challenges in restarting the industry.
Has the crisis raised air cargo’s importance in terms of airline revenue and its role in the global economy?
Air cargo flights are almost the only flights right now. The sector is doing a very important job. It is crucial not only to the airlines but also to keeping the global economy ticking over and to delivering vital equipment and medicines in the fight against COVID-19.
Governments do understand that and in general have been very helpful in facilitating air cargo flights. They have reduced costs, worked on cargo crew regulations, and ensured the relevant flight permissions.
There is still some work to do but governments have been responsive. And it is another area where IATA has played a vital role. For example, we issued guidance on using passenger aircraft for all-cargo flights in just a few days.
32m- 32 million jobs dependent on aviation are at risk
Air cargo flights are crucial to keeping the global economy ticking over and to delivering vital equipment and medicines in the fight against COVID-19.
Do you think environmental pressure will increase once flying resumes, given many stories about lower pollution during the many national lockdowns?
There have been lots of stories and plenty of statements from various parties about the CO2 reduction.
Even though airlines are under enormous financial pressure, we won’t give up on our environmental commitments. We will continue to reduce CO2, continue to reduce noise, and continue to invest in new, environmentally friendly technologies and sustainable aviation fuels. There will be no change in our targets.
What is your message to the industry and the millions of workers who depend on it for their livelihood?
Stay strong, have hope, and continue to work hard. Aviation is the business of freedom. We have a job to do to restart this industry in the safest and most efficient way possible so that together we can connect the world again.