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Luisa Cheshire

BY LUISA CHESHIRE

Governments must save airlines

The global air industry needs emergency government funding to survive and help the world recover from coronavirus, says IATA

Governments must save airlines

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The International Air Transport Association (IATA) is appealing to governments in Europe, as part of a worldwide campaign, for emergency government intervention as they fight for survival due to the collapse in air travel as a result of the Covid-19 crisis.

“Stopping the spread of Covid-19 is the top priority of governments. But they must be aware that the public health emergency has now become a catastrophe for economies and for aviation. The scale of the current industry crisis is much worse and far more widespread than 9/11, Sars or the Global Financial Crisis. Airlines are fighting for survival. European air traffic has suffered an unprecedented decline, with some markets down 90 per cent compared to last year. Millions of jobs are at stake. Airlines need urgent government action if they are to emerge from this in a fit state to help the world recover, once Covid-19 is beaten,” said Alexandre de Juniac, IATA’s director general and CEO.

Extensive cost cutting measures are being implemented by the region’s carriers to mitigate the financial impact of Covid-19. However, due to flight bans as well as international and regional travel restrictions, airlines’ revenues are plummeting—outstripping the scope of even the most drastic cost containment measures. With average cash reserves of approximately two-three months in the region, airlines are facing a liquidity crisis. Support measures are urgently needed. We estimate the total jobs supported by aviation in Europe to be 12.2m. On a global basis, IATA estimates that emergency aid of up to US$200bn is required.

IATA is proposing a number of options for governments to consider. They include:
1. Direct financial support to passenger and cargo carriers to compensate for reduced revenues and liquidity attributable to travel restrictions imposed as a result of Covid-19;
2. Loans, loan guarantees and support for the corporate bond market by the Government or Central Banks. The corporate bond market is a vital source of finance,  but the eligibility of corporate bonds for central bank support needs to be extended and guaranteed by governments to provide access for a wider range of companies. 
3. Tax relief: Rebates on payroll taxes paid to date in 2020 and/or an extension of payment terms for the rest of 2020, along with a temporary waiver of ticket taxes and other Government-imposed levies.
“As soon as Covid-19 is under control, the global economy will need to rapidly rebuild. Air connectivity will be essential for that to happen. But without help now, airlines will be in no fit state to restart operations. Many airlines may not exist at all. Assistance now will keep essential cargo services going, preserve as many jobs as possible, and ensure that supply chains and tourism can recover quickly,” said Rafael Schvartzman, IATA’s Regional vice president for Europe.

Latest Eurocontrol figures show that the worst hit European states include Latvia (-91 per cent) Italy (-87 per cent) Slovakia (-78 per cent) Poland (-78 per cent) and Slovenia (77 per cent). Of the biggest markets, air travel is down 58 per cent in France, 57 per cent in Spain, 50 per cent in Germany, 48 per cent in the Netherlands, 42 per cent in Turkey, and 37 per cent in the UK. Total jobs across all of Europe (including Eurasia) supported by aviation are 12.2m, generating GDP of US$823bn.

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