The impact of COVID-19 on the air transport industry continues to be devastating. The industry is burning through cash at a dangerous rate. Some $61 billion could disappear from cash reserves in the second quarter alone. Demand is in free-fall. Worldwide it’s down 70% compared to last year—90% in Europe. And it could even get worse.
There are no words that can adequately describe how deeply this crisis is impacting aviation.
If aviation is not functioning, the economic damage goes well beyond the sector itself. Some 65. 5million jobs are linked to aviation. If the planes don’t fly, the viability of many of these jobs disappears.
Many businesses have been ordered to close or cease operations—airlines, restaurants, tourist attractions, and hotels among them. And if global supply chains are broken, still others in manufacturing or retail will not have anything to make or sell.
Governments acting on the guidance of health authorities will determine when the lockdowns and travel restrictions can safely end. When that decision is taken, the air transport sector needs to be ready to deliver the people and goods that are required for many businesses to start operating normally again.
Our estimation is that some 25 million people’s jobs are at risk until the aviation sector is functioning again. 25 million people is equal to the entire population of Australia. It is equal to the entire labor force of Italy and larger than the workforce of major industrialized nations like Spain or Canada. The scale of the economic impact is enormous.
From this, I want to emphasize two conclusions.
The first you have already heard me speak about. Governments need to urgently provide financial relief to the airlines. That is to ensure that they can survive as viable businesses that can lead the recovery when we get to that stage. We continue to ask governments for:
- Direct financial support;
- Loans, loan guarantees and support for the corporate bond market by the Government or Central Banks, and
- Tax relief
We received some positive news today from Eurocontrol which has deferred the payment of more than EUR1.1 billion to help airlines maintain liquidity.
Throwing airlines lifelines like this at this critical stage will help people far beyond those directly employed in air transport. That is one of the reasons why we believe that governments must make the viability of airlines a priority.
Some governments are responding. But we are concerned that relief is not sufficiently available. Speed is of the essence. On average airlines have two months of cash on hand. And many airlines are already into the third week of major shutdowns of their businesses.
The second conclusion is that we cannot leave the recovery of the sector to chance. We must have firm and coordinated plans in place so that airlines can re-start operations when governments and public health authorities give us the all clear. And we need to be able to scale-up operations as demand returns.
One challenge will be the physical re-start. If airlines have been largely shut down for a few months, restarting is a complicated thing. All the licensed personnel need to be ready to go. But their licenses may have expired or the airline’s safety audit dates may have passed. Airworthiness certificates may no longer be valid. Schedules may need to be coordinated. Aircraft will need some maintenance work.
We have never shut down the industry on a global scale before. So this will be the first time for a re-opening.
The second challenge is adapting the industry to post-COVID-19 realities. Having gone through the pain of shutting down economies to fight the virus, governments will not accept the risk of reinfection. We see this in the severe measures that China has introduced to limit international flights. It is more restrictive now than it was at the height of the COVID-19 crisis in China.
We are not expecting to re-start the same industry that we closed a few weeks ago. Airlines will still connect the world. And we will do that using a variety of business models. But the industry processes will need to adapt.
So another stream of activity will involve working with governments and health authorities to understand what measures will be needed.
A particular focus will be on travel restrictions. States implemented these on a unilateral basis—closing their borders to others. We should aim to have a more managed and predictable approach to how these restrictions are revised to enable governments to re-open their borders.
Part of this will surely involve passenger screening. And we don’t want to repeat the mistakes made after 9.11 when many new processes were imposed in an uncoordinated way. We ended up with a mess of measure piled on top of measure. And nearly twenty years later we are still trying to sort it out.
In this case, we have some, if limited, time to build consensus around how to do this most effectively. Of course, we will need to work with public health authorities to understand their needs and guidance on any necessary screening measures.
At the end of the SARS crisis, temperature screening was a key factor in returning the sector to normal. We need to find the equivalent process to take us to when a COVID-19 vaccine is available. The goal we should have is an effective set of standard practices that can be implemented globally as required.
A further area of activity is on stimulating markets. With questions over so many things that we take for granted, we have the ability to re-think processes or systems to make them better when the industry starts up again.
And, by better I mean more efficient and less costly.
A good example could be visas. If we can get governments to use e-visa technology we could reduce costs and improve efficiency. Making the process easier without compromising on security would pay immediate benefits when people return to travel.
The 25 million people whose jobs are at risk as a result of this crisis will depend on an efficient re-start of the industry. IATA will be concentrating its efforts to resolve these issues with governments and other stakeholders.