Abu Dhabi, UAEMonday 1 June 2020

Iata urges G20 to prevent irrecoverable damage to global travel

Worldwide air travel demand is forecast to plunge 38% in 2020, if travel limitations and border closures continue for another three months

Alexandre de Juniac, Iata’s director general and chief executive, said that governments have the tools to prevent the loss of essential air transport connectivity. Reuters
Alexandre de Juniac, Iata’s director general and chief executive, said that governments have the tools to prevent the loss of essential air transport connectivity. Reuters

The International Air Transport Association (Iata) urged G20 leaders to act quickly to support the aviation industry in order to prevent irreversible damage to international connectivity due to the impact of Covid19.

In an open letter to the G20 Presidency, Iata’s director general and chief executive Alexandre de Juniac emphasised the essential role air transport will play in facilitating the recovery of the global economy.

“While airlines have substantial expenses which are fixed and cannot be reduced, they are taking every measure possible to mitigate the cash drain by cutting avoidable costs,” said Mr de Juniac.

“As the crisis has worsened, many airlines have been paying out more in refunds than they have received in new booking revenues. As a result, the average two-month cash reserves held by airlines are rapidly being exhausted,” he added.

Worldwide air travel demand is forecast to plunge 38 per cent in 2020, if travel limitations and border closures continue for another three months, according to Iata. The industry group has urged governments to act faster to rescue their airlines with financial packages.

Airlines worldwide are suspending most or all of their passenger flights, grounding jets and axing jobs in efforts to preserve cash due to heightened travel bans as governments try to contain the spread of the deadly virus.

As the global trade association for the air transport industry representing 290 members and 82 per cent of global air traffic, Iata estimates the cash shortfall globally at approximately $200 billion (Dh734bn).

Governments have the tools to prevent the loss of essential air transport connectivity by urgently providing or facilitating the provision of financial support and some G20 members already have acted, including Australia, Brazil and China, Iata said.

“Direct financial support, loan or loan guarantees and tax relief are all programmes that can provide both immediate and medium- to long-term assistance to the airline industry and its employees,” said Mr de Juniac.

In the meantime, Singapore Airlines announced securing up to $13bn of funding to help see it through the coronavirus crisis and expand afterward, in a sign of confidence travel demand will eventually return.

As many carriers around the world look for cash to weather the crisis, Singapore Airlines' majority shareholder, state-fund Temasek Holdings, said it would underwrite the sale of shares and convertible bonds for up to $10.3bn. Singapore's biggest bank DBS Group provided a $2.7bn loan.

"This transaction will not only tide SIA (Singapore Airlines) over a short term financial liquidity challenge, but will position it for growth beyond the pandemic," Temasek international chief executive Dilhan Pillay Sandrasegara said.

For the time being, the airline, a major customer for Airbus and Boeing, has cut capacity by 96 per cent and grounded almost its entire fleet after the Singapore government banned foreign transit passengers, the lifeblood of the hub carrier.

About $60bn of bailout funds from the $2 trillion coronavirus stimulus bill that President Donald Trump enacted on Friday will go to US airlines. Companies will not be allowed to fire employees, or carry out stock buybacks, and dividends. The rescue package offers is split evenly between loans and payroll grants.

(with inputs from Reuters)

Updated: March 29, 2020 03:56 PM

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