Emergency aid of up to $200bn is needed to save airlines
Africa’s air transport industry contributes about $55.8bn to the continent’s economy, representing 2.6% of its combined GDP
Someone once said history doesn’t repeat, but it rhymes. Today, as all the world’s airlines face a cataclysm caused by the Covid-19 pandemic, memories of the post 9-11 period come to mind. But this crisis is far worse. Within a period of a few weeks, airlines have seen passenger demand completely collapse.
For most carriers the market for air travel is actually below zero — the number of people cancelling flights exceeds the number of new bookings. That is not surprising given that more than 100 governments have closed their borders to foreign visitors and/or imposed lengthy quarantines that have the same practical effect.
As airlines’ ticket sales disappear, so does the daily cash intake from those sales, which even the most well-capitalised airlines need to pay their bills. Unfortunately, the bills haven’t gone away, although the revenue to pay them has. Airlines are doing everything they can to slow the steady outflow of cash. They are grounding hundreds of aircraft, eliminating services and in some cases imposing salary reductions, unpaid leave and retrenchments of employees. In desperation, some are hoping to outlast the crisis by shutting down entirely.
The economic damage to the industry, its employees and its supplier base is immense; and because aviation does not exist in a vacuum the harm will extend into virtually every corner of our globally connected economy. The fact is that the modern world is built on aviation connectivity. Aviation supports $2.7-trillion in economic activity, equivalent to 3.6% of global GDP.
The world’s airlines employ about 2.7-million people. Each one of these 2.7-million dedicated individuals helps to create another 24 jobs in the air transport- and tourism-related industries, such as jobs in hotels and restaurants, theme parks and museums. That works out to 65.5-million jobs around the globe that are connected to airlines.
Africa’s air transport industry contributes about $55.8bn to the continent’s economy, representing 2.6% of its combined GDP, but its airlines — both state and privately owned — have lost more than $4.4bn since the onset of the Covid-19 crisis and the almost overnight evaporation of demand and revenues.
The disruptions are likely to result in six-million fewer passengers in SA, a further 853,000 in Nigeria, 622,000 in Kenya, 479,000 in Ethiopia and 79,000 in Rwanda. At stake in just those five countries are more than 262,400 airline jobs — and 6.3-million more in allied sectors and the broader economy — together with about $1.6bn in lost base revenues.
Time is fast running out for governments to step in to help. The International Air Transport Association (Iata) has estimated that the typical airline had just two months of cash at the start of the year, and the latest available figures suggest global air passenger numbers for March are down 50% from a year ago. Support measures are urgently needed.
On a global basis our initial estimate is that emergency aid of up to $200bn is required. This should include things such as direct financial support to compensate for reduced ticket revenue that is directly attributable to travel restrictions. Government or central bank-backed loans and/or loan guarantees will also help, as will temporary tax relief and rebates on taxes paid in 2020.
In combination, these measures will provide airlines with critical breathing space until the crisis recedes. And where restrictions on entry/exit and quarantines make air services untenable, it is appropriate that governments should suspend consumer regulations that make airlines financially liable for cancellations and schedule changes.
I call aviation the business of freedom, because it liberates us from the constraints of time, distance and geography and creates opportunities for greater understanding among cultures. Even today, in its weakened state, it is aviation that is transporting doctors, nurses and much-needed medicine and testing kits into the areas hit hardest by Covid-19. When it needs to get there fast, it goes by air.
The window for firm government action is closing. An industry whose raison d'être’ is connecting people, cultures and commerce cannot survive for long under today’s conditions, and the world will be a much poorer place for it.
• De Juniac is Iata director-general and CEO.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.