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IATA estimates US$39 billion loss for airlines in April-June quarter
April 3rd 2020
The International Air Transport Association (IATA) says the global airline industry is expected to collectively post a loss of US$39 billion in the three months to June 30, 2020 as the coronavirus pandemic cripples demand. Read More »
Travel bans and rules restricting the movement of billions of people by national governments have resulted in airlines grounding hundreds of aircraft and decimated passenger revenues.
As a consequence, IATA figures published on March 31 estimated airlines would go through US$61 billion in cash reserves in the second quarter of calendar 2020, to June 30.
“Airlines cannot cut costs fast enough to stay ahead of the impact of this crisis," IATA director general and CEO, Alexandre de Juniac, said in a statement. Previously, IATA had forecast airline revenues would fall by US$252 billion, or 68%, in calendar 2020 compared with the prior year.
Variable costs were tipped to fall by 70% in the second quarter, in line with a 65% drop in capacity.
IATA said semi-fixed costs, such as staff salaries, were likely to be down by about a third as carriers temporarily stood down workers in the hope of bringing them back to work when the market recovered.
Airlines were also facing a "colossal" refund bill of US$35 billion as passengers sought their money back from cancelled flights, IATA said.
IATA said the governments of Canada, Colombia and the Netherlands have allowed airlines to issue vouchers in place of refunds. Other countries are following suit as the depth of the crisis is revealed.
"This will enable airlines to preserve the cash they need to keep cargo operations running and preserve their ability to be fully operational when we can safely re-start the industry," de Juniac said.
"When the public health crisis abates to the level where it is safe to re-start the economy, the airlines must be ready to go. The recovery will be slower and much more painful if airlines are not able to support trade and tourism."
Also this week, IATA said passenger demand, measured by revenue passenger kilometres (RPK), fell 14.1% in February, compared with the prior corresponding period. It was the sharpest contraction in demand since the September 11 2001 terrorist attacks in the U. S. and "reflected collapsing domestic travel in China and sharply falling international demand to/from and within the Asia-Pacific region", IATA said.
Asia-Pacific carriers experienced a staggering 41.3% drop in RPKs, while capacity measured by available seat kilometres (ASK) tumbled 28.2%. With demand dropping faster than the reduction in capacity, load factors were 15.1 percentage points lower, at 67.8%, for the month.
An example of the traffic collapse was the announcement this week that Hong Kong International Airport, now virtually a ghost town, had recorded its seventh straight month of passenger traffic decline, with a 68% year-on-year fall off, to 1.88 million passengers, for February.
The decline was less severe in cargo IATA figures showed, with cargo tonne kilometres (CTK) down 1.4% in February. Capacity, measured by available cargo tonne kilometres (ACTK) was 4.4% lower in the month.
The April edition of Orient Aviation magazine features a one-on-one interview with IATA’s director general and CEO, Alexandre de Juniac. He predicts a U-shaped recovery and fears recession.
