Aviation Industry- Devastating Net Loss of $39 Bn.

Wednesday 1st of April 2020

Aviation Industry- Devastating Net Loss of $39 Bn.

The International Air Transport Association, the trade association of the world's airlines, has released new data that shows airlines may burn through USD 61 billion of their cash reserves during the second quarter ending 30 June 2020, while posting a quarterly net loss of USD39 billion.

The analysis was made on the impact assessment IATA released last week, considering that there will be severe travel restrictions for three months and full-year demand falls by 38% and full-year passenger revenues drop by USD252 billion compared to 2019. The fall in demand would be the deepest in the second quarter, with a 71% drop.

The causes for an estimated net loss of USD39 billion include fall in revenues by 68%. This is less than the expected 71% fall in demand due to the continuation of cargo operations, albeit at reduced levels of activity. Further, variable costs are expected to drop sharply and fixed and semi-fixed costs amount to nearly half an airline’s cost.

On top of unavoidable costs, airlines are faced with refunding sold but unused tickets as a result of massive cancellations resulting from government-imposed restrictions on travel. “Airlines cannot cut costs fast enough to stay ahead of the impact of this crisis. We are looking at a devastating net loss of USD39 billion in the second quarter,” said Alexandre de Juniac, IATA’s director general and CEO.