Estimated Global Airline Losses Rise to $314B

The International Air Transport Association (IATA) has revised its estimate for the economic losses to the global airline industry from the coronavirus pandemic to $314 billion, up 25% from the $252 billion forecasted on March 24.

The IATA said it was basing its estimate on a projected 6% decrease in GDP in the second quarter. It said the new projections reflected a “significant deepening of the crisis” and the expectation that “severe” domestic travel restrictions would last three months. International travel restrictions would likely last more than three months.

“Passenger demand closely follows GDP progression,” the trade group said in a statement. “The impact of reduced economic activity in Q2 alone would result in an 8% fall in passenger demand in the third quarter.”

It said it expected a 55% drop in 2020 passenger revenue compared with last year and a 48% drop in traffic based on revenue passenger kilometers.

“The industry’s outlook grows darker by the day,” the IATA’s director general and chief executive officer, Alexandre de Juniac, said. “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.”

The group said governments should consider direct financial support, loan guarantees, and tax relief to compensate for revenue shortfalls.

“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,” the IATA said.

The group represents some 290 airlines including American Airlines, United Airlines, Lufthansa, and Virgin Atlantic.

Labor unions representing airline workers have urged the Treasury Department to distribute federal relief grants to pay employees and prevent furloughs, but Treasury Secretary Steven Mnuchin has said 30% of the relief should be in the form of low-interest loans.

Source: https://www.cfo.com/global-business/2020/04/estimated-global-airline-losses-rise-to-314b/