By Emmie V. Abadilla
Due to flight bans as well as international and regional travel restrictions in the midst of the coronavirus pandemic, revenues are plummeting despite drastic cost containment measures and airlines now need an emergency aid of up to $200 billion, according to the International Air Transport Association (IATA).
With average cash reserves of approximately two months in the region, airlines are facing a liquidity and existential crisis.
Support measures are urgently needed for them to survive according to Alexandre de Juniac, IATA’s Director General and CEO.
“Stopping the spread of COVID-19 is the top priority of governments. But they must be aware that the public health emergency has now become a catastrophe for economies and for aviation. The scale of the current industry crisis is much worse and far more widespread than 9/11, SARS or the 2008 Global Financial Crisis,” he pointed out.
Many routes have been suspended and demand has fallen by as much as 60 per cent on remaining ones. Millions of jobs are at stake.
Airlines need urgent government action if they are to emerge from this in a fit state to help the world recover, once COVID-19 is beaten, he underscored.
The region’s carriers are cutting their costs extensively to mitigate the financial impact of COVID-19. However, IATA is proposing a number of options for governments to consider.
Governments should give 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.
Governments and central banks should also grant loans, loan guarantees and support for the corporate bond market, which is a vital source of finance.
However, 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.
They should also provide tax relief – 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.
Airlines are essential to all modern economies and should be given urgent consideration.
This will help keep them alive and ensure airline staff – and people working in allied sectors – have jobs to come back to at the end of the crisis.
“It will enable global supply chains to continue functioning and provide the connectivity that tourism and trade will depend on if they are to contribute to rapid post-pandemic economic growth,“ stressed Muhammad Al Bakri, IATA Regional Vice President Africa, Middle East.