International Air Transport Association says airlines are burning through cash as they cannot cut costs fast enough due to pandemic. Picture: Maria Tyutina/Pexels.
International Air Transport Association says airlines are burning through cash as they cannot cut costs fast enough due to pandemic. Picture: Maria Tyutina/Pexels.

In crisis: Airlines are burning through $300K per minute

By Travel Reporter Time of article published Oct 7, 2020

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International Air Transport Association Director General and CEO Alexandre de Juniac said there's "little improvement in the aviation industry’s position amid the Covid-19 crisis".

He spoke at a media briefing on Tuesday, October 6.

"Airlines continue to burn through cash. For the second half of the year, we expect, on average, for airlines to burn through cash at about $300 000 per minute for a total of $77-billion. And that’s on top of the $51-billion cash burn in the second quarter.

"We are burning through cash because we cannot cut costs fast enough to make up for the impact of not being able to do business. Borders for the most part remain closed, " he emphasised.

He offered a solution. He believes the systematic testing for Covid-19 before departure is the answer.

"We believe that should give governments the confidence to re-open borders. We are advocating for that with governments, the health authorities, WHO and through ICAO.

"In the meantime, however, the crisis is growing longer and deeper than anybody could have imagined. The months ahead are traditionally the weakest for airlines. Normally they survive on the cash cushion from the busy peak travel period in July and August. We did not get that boost this year.

"Airlines did receive $160-billion in support from governments. That was a lifeline. We would have seen many more bankruptcies and job losses without it. Now, most of those programs are ending. So it is time to ask governments to take extra measures to replace or extend them into the longer term. The potential for failures and job losses in the coming months is enormous, " he said.

De Juniac also shared the flight of airport and air navigation service partners.

"This is not just an airline problem. We know that our airport and air navigation service partners are also struggling. They suffer from the same lack of demand that airlines do. And increasing their unit charges - passing the costs to other part of the value chain - to cover the gap is not an option.

"Remember, at the end of the value chain are consumers and they are price sensitive. Already two-thirds of travellers say that they will postpone travel until their personal financial situation stabilises. Anything that makes travel more expensive in this environment will only delay the recovery and put jobs at risk, " he added.

Last week ATAG announced that about 46 million jobs are in peril because people are not travelling. About 10 percent (4.8 million) of those are in the aviation industry.

"The enormity of what is happening to aviation has consequences far beyond the industry itself. And the means for financial sustainability in this long and deep crisis is far beyond what the industry is capable of ensuring by itself.

"Governments must be actively involved in supporting the entire sector’s finances through this unimaginably difficult time. And they should do it knowing that 10 percent of global economic activity is related to travel and tourism. That depends on connectivity. So supporting the industry in these challenging times is an investment worth making.

"Only a financially viable industry will be able to accelerate a broad economic recovery when borders re-open. The sector will not be ready to do that without government support," he added.

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