Can These Five Actions Save Air Travel?
Joe Cortez December 08, 2020
The International Air Transport Association suggests five key actions from governments could provide a needed airline stimulus as passenger declines continue. Through tax and fee waivers, advance ticket purchases and passenger travel subsidies, the IATA says airlines can avoid adding additional debt to stay aloft.
Is airline stimulus as simple as governments adding five activities to their spending plans? The International Air Transport Association (IATA) suggests in their latest release that the key to supporting airlines through the COVID-19 pandemic may be in extending tax and fee waivers, making advance ticket purchases and creating passenger travel subsidies.
With $7 Billion Global Monthly Cash Burn Predicted Through Mid-2021, IATA Argues for Spending
According to data from IATA, the global airline industry is expected to post over $118 billion in losses for 2020, all directly attributed to the COVID-19 pandemic. The hurt is expected to continue into 2021: air carriers are currently primed to post $39 billion in losses, with a combined cash burn rate of around $7 billion per month over the first half of the new year.
Governments around the world have contributed $173 billion towards airlines, including the $32 billion CARES Act in the United States. While debate on a “phase four” package continues in Congress, the IATA suggests there may be more creative options to help airlines stay aloft during this difficult time. They propose a five-step program, based on support plans initiated by governments around the world.
Among the passenger-facing options, the IATA suggests continuing waivers on government charges, taxes and fees, while offering passenger travel subsidies to flyers. The CARES Act suspended certain airport fees from tickets, which the industry organization says could reduce airfare and encourage travel. Additionally, outgoing Arizona senator Martha McSally introduced a bill in June 2020 to offer $4,000 in travel credits to Americans, but the legislature never gained traction.
The trade group also suggests governments offer route subsidies for flights to local or regional destinations, offer financial incentives for keeping a high number of available seats flown, or purchase advance tickets from airlines for future use. The IATA cites actions by Cyprus, Greece and Hong Kong as support for these options.
“A robust economic recovery needs people to start traveling again,” IATA director general and CEO Alexandre de Juniac said in a press release. “There are many good ideas out there. Any government stands to benefit by including proven stimulus measures into their economic recovery plans. When people travel, economies prosper and grow.”
Creative Ideas Forwarded to Prevent Airlines from Assuming Debt
The IATA is offering the ideas in the hopes that governments will take action to prevent airlines from taking on more debt. Their data shows airline debt has risen by 51.4 percent during the COVID-19 pandemic, to a total of $651 billion. In comparison, industry revenue is expected to be $459 billion in 2021.
In the United States, airlines have raised debt through their frequent flyer programs to keep operations moving forward. Delta Air Lines sought $6.5 billion in financing from SkyMiles, United Airlines raised $5 billion against MileagePlus, while American Airlines valued the AAdvantage program at up to $31.5 billion.
"According to data from IATA, the global airline industry is expected to post over $118 billion in losses for 2020, all directly attributed to the COVID-19 pandemic. The hurt is expected to continue into 2021: air carriers are currently primed to post $39 billion in losses, with a combined cash burn rate of around $7 billion per month over the first half of the new year. Governments around the world have contributed $173 billion towards airlines, including the $32 billion CARES Act in the United States." So purely mathematically, Losses: 118B+39B = 157B in losses. But the bailout already is 173B, so 173B-157B = plus 18B into 2021? I realize it is far more complex than this simple accounting and how bailout money is distributed is key plus they did have record profits for years...but this demonstrates the airlines will be just fine.
@FlyingNone: Exactly. When businesses are forced to be closed, we shouldn't be surprised when they permanently close. At least in Florida, we've had more people dying from car accidents daily than COVID...but you won't hear that in the news.
“A robust economic recovery needs people to start traveling again,” IATA director general and CEO Alexandre de Juniac said in a press release." If people are out of a job how are they going to contribute to an economic recover ? - with what money are they going to travel?, stay in hotels, find restaurants and sightseeing venues that aren't closed?, the last thing they are going to do or even think about is travel.