An International Air Transport Association (IATA) report examining airline travel restrictions impact indicates carriers may use $61 billion in quarterly cash reserves and post net losses of $39 billion.
The analysis stems from a scenario in which severe travel restrictions last for three months, which determined full-year demand would decrease 38 percent and full-year passenger revenues fall by $252 billion compared to 2019. The fall in demand would be the deepest in the second quarter, with a 71 percent drop.
“Airlines cannot cut costs fast enough to stay ahead of the impact of this crisis,” IATA Director General and CEO Alexandre de Juniac said. “We are looking at a devastating net loss of $39 billion in the second quarter. The impact of that on cash burn will be amplified by a $35 billion liability for potential ticket refunds. Without relief, the industry’s cash position could deteriorate by $61 billion in the second quarter.”
He said travel and tourism are essentially shut down in an extraordinary and unprecedented situation.
“Airlines need working capital to sustain their businesses through the extreme volatility,” de Juniac said. “Canada, Colombia, and the Netherlands are giving a major boost to the sector’s stability by enabling airlines to offer vouchers in place of cash refunds. This is a vital time buffer so that the sector can continue to function. In turn, that will help preserve the sector’s ability to deliver the cargo shipments that are vital today and the long-term connectivity that travelers and economies will depend on in the recovery phase.”