U.S tops table in financial backing for its airlines in COVID-19 battle; Singapore leads world in support for its aviation sector

May 29th 2020

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The International Air Transport Association (IATA) has warned the higher debt levels airlines will carry as they emerge from the coronavirus pandemic will have consequences for their recovery. Read More »

Figures published by the trade body this week showed airlines were calculated to have added about US$120 billion in net debt to their commitments for calendar 2020. The forecast would lift the industry's global net debt by 28%, to $550 billion, from $430 billion at December 2019. By comparison, new equity is calculated at $30 billion.

IATA director general and CEO, Alexandre de Juniac, said government assistance had been a lifeline for airlines and helped avert a large number of bankruptcies.

However $67 billion, or more than half of all government aid, was debt instruments such as loans, loan guarantees and deferred tax payments, he said. IATA would like governments to be open to alternative forms of support, such as grants, subsidies or payroll assistance.

"The increased debt burden will have consequences," de Juniac told reporters this week.

In the Asia-Pacific IATA said, governments have pledged about $26 billion in financial relief so far, which represented about 10% of the $257 billion in revenues airlines across the region generated in calendar 2019.

The 10% figure ranked below North America (25%) and Europe (15%), but was above Latin America, Africa and the Middle East at 1%.

"Governments will still want airlines to improve environmental performance, provide affordable connectivity and manage the increased operational costs of COVID-19 containment measures. And they will need to re-pay the debt. It will make the recovery longer and more difficult,” de Junaic said.

"For governments that have not provided assistance, we continue to ask them to do so. But, considering the industry’s ballooning debt, our advice is to focus on ways that will not increase the debt burden."

IATA chief economist, Brian Pearce, said on Tuesday, during the association’s weekly presentation with media, there was "no clear correlation between good prior financial performance and the extent of aid".

"Governments are not focusing all of their aid on the stronger airlines," Pearce said.

Airlines were expected to experience a cash burn of $61 billion in the three months to June 30, with revenues still challenged by travel restrictions, he said.