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Airlines face over $70-B cash crisis

Despite the restart of operations, the airline industry expects to burn through $77 billion in cash for the second half of this year, at $13 billion per month or $300,000 per minute, the International Air Transport Association (IATA) warned.

The slow recovery of air travel will see the industry continuing to burn through cash at an average rate of $5 to $6 billion per month in 2021, running up to $72 billion total.

Despite cutting costs over 50% during the second quarter, the industry went through $51 billion in cash as revenues fell almost 80% compared to the year-ago period, IATA estimated.

“The crisis is deeper and longer than any of us could have imagined and the initial support programs are running out,” stressed Alexandre de Juniac, IATA’s Director General and CEO.

“Today, we must ring the alarm bell again. If these support programs are not replaced or extended, the consequences for an already hobbled industry will be dire,” he underscored.

Todate, governments around the world have provided $160 billion in support, including direct aid, wage subsidies, corporate tax relief, and specific industry tax relief including fuel taxes.

Airlines need additional relief measures, including financial aid that does not add more debt to the industry’s already-highly-indebted balance sheet.

“Historically, cash generated during the peak summer season helps to support airlines through the leaner winter months. Unfortunately, this year’s disastrous spring and summer provided no cushion,” de Juniac revealed.

Instead, airlines burned cash throughout the period.

With no timetable for governments to reopen borders without travel-killing quarantines, they cannot rely on a year-end holiday season bounce to provide extra cash to tide them over until spring.

The industry is not expected to turn cash positive until 2022.

Already, airlines have undertaken extensive self-help measures to cut costs.

This includes parking thousands of aircraft, cutting routes and any non-critical expense and furloughing and laying off hundreds of thousands of experienced and dedicated employees.

Consumers have little appetite for cost increases.

In a recent IATA survey, some two thirds of travelers have already indicated that they will postpone travel until the overall economy or their personal financial situation stabilizes.

“Increasing the cost of travel at this sensitive time will delay a return to travel and keep jobs at risk,” de Juniac conceded.

The global impact of the severe downturn this year, combined with a slow recovery, is 46 million potential job losses and $1.8 trillion dollars of economic activity at risk.


Source: Manila Bulletin (https://mb.com.ph/2020/10/07/airlines-face-over-70-b-cash-crisis/?utm_source=rss&utm_medium=rss&utm_campaign=airlines-face-over-70-b-cash-crisis)

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