Airlines Expected to Burn $61 Billion in Cash During Second Quarter 2020

A new report from the International Air Transport Association (IATA)—which represents some 290 airlines or 82 percent of the world’s total air traffic—forecasts that major airlines will burn through $61 billion of their cash reserves by the close of 2020’s second quarter.

IATA is urging global governments to slacken rules which require currently airlines to provide cash refunds to customers for canceled trips, which look to total $35 billion during this period.

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The results of an impact assessment, based on a scenario in which severe today's COVID-19-related travel restrictions lasted for three months, show the airlines’ overall revenue plummeting by 68 percent during the anticipated height of the coronavirus pandemic.

IATA is predicting the global aviation industry to post net losses of up to $39 billion in the second quarter and as much as $252 billion in overall revenue this year.

While the COVID-19 crisis continues to make travel almost impossible, airlines are making cuts where they can—canceling routes, grounding fleets and laying off employees. But, as IATA’s Director General and CEO, Alexandre de Juniac, said during a March 31 media briefing, “When 70 percent of your business vanishes overnight, there is no amount of cost-cutting that can adequately fill the gap.”

The IATA estimated that airlines typically had cash balances at the start of this year sufficient to support two months’ worth of operations. Based upon information from the CAPA Centre for Aviation, Bloomberg reported that most carriers will be bankrupted by May if they can’t secure support.

Several world governments have stepped up so far, providing financial aid or relief measures in answer to the airline industry’s pleas, including Australia, China, Colombia, New Zealand, Norway, Singapore and the U.S.

#Airlines are facing rapid cash burn despite severe capacity cuts - latest IATA estimates shows to what extent, in Q2 alone. #COVID19

See more: https://t.co/zXL4CtaOKf pic.twitter.com/6bttcnhdWx

— IATA (@IATA) March 31, 2020

While consumers are expressing frustration with airlines’ reluctance to issue cash refunds for tickets, de Juniac argued that aviation needs to retain this capital in order to survive the current volatility. He’s in favor of governments allowing airlines to issue vouchers in lieu of refunds, as Canada, Colombia and the Netherlands have recently done.

This would serve as a vital buffer, said de Juniac, “so that the sector can continue to function. In turn, that will help preserve the sector’s ability to deliver the cargo shipments that are vital today and the long-term connectivity that travelers and economies will depend on in the recovery phase.”

For more information, visit iata.org.