IATA has increased its estimate of the cost of the coronavirus crisis to European airlines, and now believes it will cut sector earnings 2020 earnings by more than half.
The association is predicting an annual revenue reduction of 55% against 2019, a hit of $89 billion. This represents an increase of $13 billion against its estimate from 24 March, and assumes severe travel restrictions for three months followed by a gradual lifting of measures.
This would result in a $452 billion impact on the wider economy, IATA warns. “We are entering a very damaged phase for European air connectivity,” says IATA’s regional vice-president for Europe, Rafael Schvartzman.
He notes that at the start of the crisis IATA estimated that European airlines had on average just two months of liquidity available. Since then many airlines have obtained financial assistance, but not all have been able to do so. Hence, it is “vital that governments accelerate plans to support the industry”, adds Schvartzman.
As well as financial assistance, IATA is urgently requesting greater flexibility on refunds. Schvartzman notes that European airlines owe $10 billion back to customers for cancelled flights. While IATA is not disputing the need to reimburse customers, it notes that to do so in seven days, as currently stipulated, is placing airlines under extreme financial stress as they are desperate to shore up cash reserves. “We know this is controversial, but we need to look at the bigger picture.”
Airlines also need help to preparing for a return to the skies. This, IATA argues, should include confidence-building measures, harmonised global standards, and a recognition that governments must draw on airlines’ operational expertise. There should also be a clear exit strategy from any additional safety measures that may be mandated.
“The world will rely on airlines and air connectivity to restore the global economy,” Schvartzman says. “A successful restart of the industry will be crucial. To help with that, IATA is hosting a series of regional summits to bring governments and key stakeholders together, to maximise the chances of an orderly restart.”
Asked about ticket pricing – following IATA director general Alexandre de Juniac’s recent comment that cheap travel would be “over” if social distancing were enforced on aircraft – Schvartzman notes: “If you are limiting capacity, then that will affect pricing.”
He adds that given the stresses being placed on the industry, some level of consolidation is inevitable.
