Coronavirus: Airlines face ‘rapid cash burn’

The International Air Transport Association (Iata) forecasts that airlines could “burn through” $61 billion of their cash reserves in the second quarter of 2020 as the coronavirus pandemic continues.

Its analysis estimates that airlines are on track to make losses of $39 billion in the second quarter – while they are faced with refunding sold but unused tickets as a result of massive cancellations. The second quarter liability for these is a “colossal” $35 billion.

“Cash burn will be severe,” warned the aviation organisation.

If the severe travel restrictions last for three months, full-year demand is estimated to fall by 38% and full-year passenger revenues will drop by $252 billion year-on-year.

Alexandre de Juniac, Iata’s director-general and chief executive, said: “Airlines cannot cut costs fast enough to stay ahead of the impact of this crisis. We are looking at a devastating net loss of $39 billion in the second quarter.

“The impact of that on cash burn will be amplified by a $35 billion liability for potential ticket refunds.

“Without relief, the industry’s cash position could deteriorate by $61 billion in the second quarter.”

Iata said several governments are providing support for their aviation sectors, including Colombia, the US, Singapore, Australia, China, New Zealand and Norway.

Furthermore, Brazil, Canada, Colombia, and the Netherlands have relaxed regulations to allow airlines to offer passengers travel vouchers in place of refunds.

Juniac added: “Canada, Colombia, and the Netherlands are giving a major boost to the sector’s stability by enabling airlines to offer vouchers in place of cash refunds. This is a vital time buffer so that the sector can continue to function.”

The UK’s Airport Operators’ Association has also highlighted how governments around the world are supporting aviation – but warns the UK is lagging behind.

MoreCoronavirus: Airlines highlight economic impact across Europe

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