Home Aviation As Covid-19 crisis deepens, recovery hopes for global aviation keeps retreating

As Covid-19 crisis deepens, recovery hopes for global aviation keeps retreating


The odds of airlines surviving the Covid-19 crisis have worsened, as a hoped-for rebound in world air travel will probably not come until 2021, an industry body has warned, adding that global carriers are expected to burn through US$61 billion of cash in the next three months.

The dire projections came as China, which the International Air Transport Association (IATA) previously believed would recover more quickly from the coronavirus epidemic, was experiencing stalled domestic travel and restricted overseas flights.

“Airlines are quickly running out of cash. It is a matter of survival, as we have this enormous cash problem in front of us,” IATA director general and CEO Alexandre de Juniac said at a weekly media briefing on Tuesday.

Global airlines are on the hook for US$35 billion in refunds for unused tickets, worsening a cash crunch that is likely to bankrupt some carriers. That prompted the global industry body to plead with travellers to accept vouchers instead.

According to projections made by the IATA, carriers are likely to register a net loss of US$39 billion from April to June. Airlines typically have a cash reserve of about two months’ revenue.

“These numbers show the crisis is beyond whatever we’ve had in our industry,” de Juniac said.

A V-shaped recovery is no longer in sight, due to the deep recession triggered by lockdowns of cities and countries worldwide.

“This time it’s different,” said IATA chief economist Brian Peace, on fears the virus could return. “It could be that it takes much longer [to recover]. We are exploring scenarios where we have a much longer period of weakness.”

China appeared to be bouncing back, with flight cuts being reversed, services added and fuller planes, but then imposed further travel restrictions. The measures stalled its recovery in domestic travel and dealt a blow to neighbouring countries, which will only benefit once travel restrictions are lifted.

In Hong Kong, the administration handed out HK$2.6 billion in financial relief to the aviation sector, but local companies have said it was nowhere near enough.

Last week, Singapore Airlines secured the largest financial package of any carrier since the outbreak. It tapped shareholders for up to US$13.3 billion, surprising some analysts with the amount raised to bolster its balance sheet.

Heavily indebted American Airlines, one of the world’s largest carriers, also secured a government lifeline worth US$12 billion.

Also on Tuesday, Air New Zealand laid bare its financial hardship as it cut close to 30 per cent of its workforce. It was on pace to earn just US$300 million revenue by years’ end, compared with US$3.4 billion in 2019, based on current booking patterns. Emirates, the world’s largest long-haul airline, also said it would get a government bailout.

IATA last week predicted airlines would lose US$252 billion of passenger revenue this year, 44 per cent of the previous year’s figure, while looking for bailouts worth US$200 billion. Ticket revenue is expected to be down 68 per cent, to US$67 billion, in the second quarter.

In the Asia-Pacific region, which includes the world’s fastest-growing market, China, airlines are expected to lose US$88 billion of revenue, with demand dropping by 37 per cent.

John Grant, senior analyst of airline schedules provider OAG, said in a Covid-19 briefing last week that the industry was looking to China to lead it out of the crisis.

He added that markets in South Korea, Japan, Singapore and Thailand, which have close travel and trade ties with China, are more likely to benefit from a China-led recovery.



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