Global airlines have joined together to warn of potential bankruptcies in the industry as government aid programs come to a close, and call for additional support.
According to the International Air Transport Association (IATA), which represents around 300 airlines around the world, the airline industry is set to burn through another $77 billion collectively throughout the second half of 2020, as it continues to battle through the COVID-19 pandemic.
According to IATA figures, the industry consumed $51 billion in cash in the second quarter alone, as the pandemic brought global travel to a near-standstill.
“The issue now is that aid, particularly the wage subsidies, is starting to be withdrawn,” IATA chief economist Brian Pearce said.
Government financial aid packages are tapering off around the world, as the global pandemic stretches into its seventh month.
Many in the industry globally have called for an extension to government relief, with US-based airlines gearing up to furlough or lay off up to 40,000 workers as hope for additional government support diminishes.
The IATA noted that while some sectors have been able to see recovery over the last number of months, a lack of support in more affected sectors will result in further airline bankruptcies in the northern hemisphere, particularly as winter looms, and the collapse in revenue continues to dwarf cost savings.
The average carrier now has enough cash to account for 8.5 months of operations, according to Pearce.
“We’re facing some tough winter months for airlines when cash flows are always seasonally weak,” he said.
“We’re looking [at] airlines getting into trouble if not failing without either further government support or [being] able to access capital markets for more cash.”
The call for more government support to the industry comes following the IATA’s push to adopt a global system of rapid pre-flight COVID testing in lieu of border restrictions and quarantine requirements, in order to reinvigorate the travel industry.
