PARIS: Their fleets grounded for months owing to the coronavirus, airlines have sought with varying degrees of success state assistance to avoid going under altogether.
But ahead of a return to normal service many carriers are weighed down by debt as they seek to take wing when mass demand finally takes off again. The forecast is for exceptionally cloudy skies with the International Air Transport Association in April saying passenger demand had plummeted 94.3 percent over early 2019 and warning receipts will more than halve this year.
On Tuesday, IATA said its 290 member carriers were heading for a combined historic net loss of more than $84 billion this year after the world went into mass lockdown to limit the spread of Covid-19 and a further $15 billion next year. Facing such losses, carriers have been queuing up for state support.
Governments have not turned a deaf ear, earmarking $123 billion to date, 67 billion of which will have to be reimbursed -- but the sector is set to burn through an estimated $60 billion of cash in the second quarter of 2020 alone.
Although the support is more than small beer, IATA estimates the carriers’ debt pile will hit $550 billion -- a rise of 28 percent compared with before the virus crisis broke and 92 percent of expected 2021 revenues.
Air France has obtained a 7 billion euro ($7.9 billion) loan package and Lufthansa an overall aid package worth 9 billion euros. US carriers have won pledges of $50 billion support -- half of it loans -- while Hong Kong’s Cathay Pacific is due for a $5 billion state-backed bailout.
Some airlines have filed for bankruptcy -- notably Latin America’s two largest carriers LATAM and Avianca. Thailand’s cash-strapped national carrier is seeking restructuring through the bankruptcy court, while Virgin Australia and South African Airways have fallen by the wayside.
"Where governments have not responded fast enough or with limited funds, we have seen bankruptcies. Examples include Australia, Italy, Thailand, Turkey, and the UK," notes IATA director general Alexandre de Juniac. "Government aid is helping to keep the industry afloat. The next challenge will be preventing airlines from sinking under the burden of debt that the aid is creating," de Juniac added.
