IATA: continued Government relief measures needed
To get airlines through the Winter season
The International Air Transport Association (IATA) warned that the airline industry faces a hard Winter and called on governments around the world to continue providing relief measures as the COVID-19 crisis continues.
Airlines are expected to post a loss of $84.3 billion in 2020 and government financial relief is a lifeline to many airlines. The bulk of airlines make their money in the northern Summer season, while the Winter season, even in the best of times, is a struggle to remain profitable. For example, the 2019 net profit margin for European airlines followed the normal seasonal pattern and was 9% and 17% respectively in Q2 and Q3 (northern summer). But it started at -1% in Q1 and finished the year at 2% in Q4 (northern winter). The Winter season will be even more challenging amid the recovery from COVID-19.
Public opinion research in the first week of June 2020 showed greater caution among travelers in returning to travel. Only 45% of travelers surveyed intend to return to the skies within a few months of the pandemic subsiding. A further 36% said that they would wait six months. That is a significant shift from April 2020 when 61% said that they would return to travel within a few months of the pandemic subsiding and 21% responded that they would wait about six months.
The survey findings are corroborated in key passenger trends demonstrating continuing market uncertainty:
Overall bookings are down 82% year-on-year compared to June 2019.
Long-haul forward bookings for the first week in November 2020 are 59% below normal levels. Historical trends show about 14% of airline tickets are sold 22 weeks in advance of travel. Current bookings for 1-7 November show that tickets have been sold to only 5% of the 2019 number of passengers.
Passengers are booking closer to the time of travel. Bookings for travel 20 or more days in the future accounted for 29% of bookings made in May 2020, down from 49% in 2019. Similarly, 41% of bookings made in May 2020 were for travel within 3 days, more than double the 18% in May 2019.
IATA highlighted four keys areas where governments could assist airlines:
Extending the waiver from the 80-20 use-it-or-lose-it rule in the Worldwide Airport Slot Guidelines. In these extraordinary times, airlines need much more flexibility to plan schedules and business critical decisions should not be compromised by slot allocation guidelines designed for normal times.
Continued financial assistance in ways that do not increase industry debt levels which have risen sharply. Some governments are exploring measures including subsidizing domestic operations, and waiving airport and air traffic control charges.
Extensions to wage subsidies and corporate taxation relief measures. The wage subsidy schemes have provided some $35 billion in relief to airlines. Tapering these more slowly would give airlines more time to recover and minimize job losses. Relief for corporate and indirect taxes such as VAT, passenger taxes or fuel taxes would support market stimulus.
Avoiding increases in charges and fees. While airports and air navigation service providers have suffered revenue falls, steep increases in charges must be avoided during the restart period as this will severely impact airline financials and market recovery. Similarly, governments should cover the costs of new health measures imposed as a result of COVID-19.
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