Global air travel demand is down by 94%, exposing airlines to a liquidity crisis as their revenues take a hit, while fixed costs and short term liabilities remain, IATA said on Tuesday, pegging the bailout package for carriers worldwide at approximately $200-250 billion.
“Border closure and travel restrictions have resulted in passenger demand falling to zero for many airlines. We had earlier estimated losses for airlines globally to be at $113 billion and we are already beyond that,” said Brian Pearce, Chief Economist at IATA — a trade association of the world’s airlines.
He was speaking at a global video conference with the press.
Mr. Pearce explained that fixed obligations (such as debt servicing) as well as short-term liabilities for airlines are driving the current liquidity crisis for the sector, in the absence of revenue.
At the start of the year, 75% of the world’s airlines had cash enough only for three months, “which is pretty much running out today,” he said. Alexander de Juniac, Director General and CEO, IATA, appealed to governments of the world to help airlines and lower airport charges, overflight fee, passenger taxes as well as security fees to “relieve airline costs”.
He estimated that a bailout package for airlines globally would cost $200-250 billion.
Oil slump inadequate
Even though crude oil has fallen significantly, resulting in savings of $28-30 billion in fuel, revenue losses are much higher.
“Time is of essence,” said Mr Juniac, adding that such a help extended to airlines will enable faster recovery after COVID-19 spread abates.
However, China has already showed signs of recovery and its airlines have reported 60% of passenger load factor or seat occupancy and flight schedules are on the rise.
