Previously, IATA estimated $252 billion in lost revenues (-44% vs. 2019) based on a scenario with severe travel restrictions lasting three months.
The updated figures reflect a significant deepening of the crisis and include the following parameters:
- Severe domestic restrictions lasting three months
- Some restrictions on international travel extending beyond the initial three months
- Worldwide severe impact, including Africa and Latin America (formerly predicted to have a milder impact).
Full-year passenger demand (domestic and international) is expected to be down 48% compared with 2019. One factor driving this fall is the anticipated worldwide recession. Global GDP is expected to shrink 6% in Q2 alone, three times worse than at the height of the Global Financial Crisis.
A second factor is travel restrictions: As of early April, the number of flights globally was down 80% compared with 2019 in large part due to government lockdowns. Domestic markets could see the start of an upturn in Q3, but international markets will likely be slower to resume.
“The industry’s outlook grows darker by the day,” said Alexandre de Juniac, IATA’s Director General and CEO. “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.”
Financial relief for airlines should be a critical policy measure for governments, believes de Juniac. Not only will this keep vital supply chains working through the crisis but also 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,” de Juniac adds. “If airlines are not ready, the economic pain of COVID-19 will be unnecessarily prolonged.”
IATA proposes a number of relief options for governments to consider, including:
- Direct financial support to passenger and cargo carriers to compensate for reduced revenues and liquidity attributable to travel restrictions imposed as a result of COVID-19
- Loans, loan guarantees, and support for the corporate bond market by governments or central banks. The corporate bond market is a vital source of finance for airlines, but the eligibility of corporate bonds for central bank support needs to be extended and guaranteed by governments to provide access for a wider range of companies
- Tax relief in the form of rebates on payroll taxes paid to date in 2020 and/or an extension of payment terms for the rest of 2020, along with a temporary waiver of ticket taxes and other government-imposed levies.