There are still large gaps in the financial aid needed to help airlines survive the COVID-19 crisis. The US government has led the way with its CARES Act being the main component of financial aid to North American carriers which in total represented a quarter of 2019 annual revenues for the region’s airlines. This is followed by Europe with assistance at 15% of 2019 annual revenues and Asia-Pacific at 10%. But in Africa, the Middle East and Latin America average aid is around 1% of 2019 revenues.

“Many governments have stepped up with financial aid packages that provide a bridge over this most difficult situation, including cash to avoid bankruptcies. Where governments have not responded fast enough or with limited funds, we have seen bankruptcies. Examples include Australia, Italy, Thailand, Turkey, and the UK. Connectivity will be important to the recovery. Meaningful financial aid to airlines now makes economic sense. It will ensure that they are ready to provide job-supporting connectivity as economies re-open,” said de Juniac.

The Impact of Debt

The kind of aid provided will influence the speed and strength of the recovery. IATA urged governments still contemplating financial relief to focus on measures that help airlines raise equity financing. “Many airlines are still in desperate need of a financial lifeline. For those governments that have not yet acted, the message is that helping airlines raise equity levels with a focus on grants and subsidies will place them in a stronger position for the recovery,” said de Juniac.

“A tough future is ahead of us. Containing COVID-19 and surviving the financial shock is just the first hurdle. Post-pandemic control measures will make operations more costly. Fixed costs will have to be spread over fewer travelers. And investments will be needed to meet our environmental targets.  On top of all that, airlines will need to repay massively increased debts arising from the financial relief. After surviving the crisis, recovering to financial health will be the next challenge for many airlines,” said de Juniac.

Last week, the IATA Board of Governors committed to five key principles for the industry re-start.  Among these are commitments to the safety and security of staff and travelers, to meeting the industry’s environmental targets and to being a meaningful driver of the economic recovery with affordable connectivity.

Remarks of Alexandre de Juniac at the IATA Media Briefing on COVID-19, 26 May

Brian’s presentation has pointed out a few things which are very important.

First, the industry is struggling through the crisis. Airlines have received over $120 billion in financial assistance from governments. That is helping to avert a big number of bankruptcies. But the number of airlines going under is growing. So we continue our call on governments to provide financial support.

The second point is that the kind of financial assistance provided has consequences. Over half the government aid ($67 billion) is in a form that will increase debt—loans, loan guarantees, deferred tax payments etc. These have been life-saving measures for the airlines.

Policy makers, however, should be fully aware that the increased debt-burden will have consequences. Governments will still want airlines to improve environmental performance, to provide affordable connectivity and to manage the increased operational costs of COVID-19 containment measures. And they will need to re-pay the debt. It will make the recovery longer and more difficult.

For governments that have not provided assistance, we continue to ask them to do so. But, considering the industry’s ballooning debt, our advice is to focus on ways that will not further increase the debt burden. This could be grants, subsidies, or payroll assistance.

Before I take your questions, I would also like to highlight a growing concern on the quarantine measures that some governments are putting in place.

One development is of particular concern. That is the politicization of quarantine measures. In response to the UK government’s announced 14-day quarantine measures for all arrivals, France announced that it would do the same for arrivals from the UK. Measures must be guided by science, not politics. And tit-for-tat quarantine measures are, frankly, unacceptable.

Last week we outlined principles that our Board of Governors has committed to for the recovery. Health and safety are at the top of the list. And this is followed by support for scientifically based measures. If governments do not have the confidence to open their borders without imposing onerous quarantine measures, then we need to work with them to understand what scientifically supported measures will give them that confidence.

The good news is that the technology for COVID-19 testing at scale is advancing quickly. We still don’t have a perfect solution. But there are hopeful signs that this could eventually play an important role for travel.