IATA criticises lack of action from South American governments

written by Dylan Nicholson | June 1, 2020
LATAM Airlines Boeing 787-8 CC-BBF at Sydney Airport. (Bidgee/Wikimedia Commons)

The International Air Transport Association (IATA) has criticised Latin American governments for a lack of action and assistance for airlines as the coronavirus continues to devastate the industry.

The group is also questioning when the sector will return to pre-virus strength and whether all carriers will survive the pandemic.

Peter Cerda, IATA’s vice-president for Latin America, has said in a 28 May webcast that the region’s governments have provided less than 1 per cent of the airlines’ 2019 operating revenue in financial aid, making it the least-supportive region in the world. While governments on other continents have stepped in with hefty aid packages to help their airlines manage through the crisis, totalling about $123 billion globally, South American governments have notably been lagging, he says.

“Our region is at a significant disadvantage,” Cerda says, noting that the virus will cause air travel in many South American countries to essentially cease for four or more months. China and countries in Europe dealt with a two-month hiatus before the airlines saw an uptick in bookings and larger numbers of passengers began considering travel.

Much of South America has heavy travel restrictions in place, with most countries planning to open in coming weeks. Those with the heaviest restrictions are Colombia and Argentina, which have basically halted passenger air transport operations until 31 August and 1 September, respectively.

“This is having a significant burden on the airline industry. There’s just not enough cash in their banks to sustain more than two to three months of what is practically a 93 per cent schedule stoppage. That’s why we need the governments in our region to step up to the plate and provide that financial support that is needed to safeguard air travel in the region,” Cerda said.

IATA’s complaint comes as two of the continent’s major airlines, Colombia’s Avianca and Chile-based LATAM filed for bankruptcy protection earlier this month. Both airlines have cited liquidity issues as the main motivator in taking this step. Bankruptcy protection will help them prevent creditors from seizing aircraft and better ensure they can restart operations when passenger demand recovers.

Cerda said there will likely be more airline victims before the crisis ends.

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“As the days continue and the pandemic is not resolved, and we continue to have the industry on the ground, we are going to be seeing more and more airlines having to go through reorganisation, or Chapter 11. We are also going to have airlines that do not have the resources to be able to restructure, and they will close down,” Cerda said. “That is a reality. The longer this crisis continues, the longer the airlines are on the ground, the greater the risk. You will have airlines that just cease to operate.”

A return to 2019 domestic travel numbers in South America could occur “sometime in 2022”, with international travel returning two years later, he added.

“There is a long road ahead for the industry to recuperate the numbers that we had in 2019,” Cerda said.

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