Airlines intensify calls for up to $200B in government aid worldwide

Coronavirus
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On Monday, the trade group representing major U.S. airlines requested almost $60 billion in grants and loans.

The global airline industry on Tuesday intensified its call for urgent government help amid the coronavirus crisis, as Treasury Secretary Steve Mnuchin heads to Capitol Hill to pitch senators on a massive stimulus plan that’s expected to include billions of dollars to prop up U.S. airlines.

The CEO of the International Air Transport Association on Tuesday predicted that the airline industry globally would need $150 billion to $200 billion in government assistance.

“We are obviously in an extraordinary time, a terrible crisis — one of the most severe we have ever had — and so we have asked governments to take extraordinary measures,” Alexandre de Juniac said on a call with reporters.

Governments have already taken steps like waiving “use-it-or-lose-it” slot rules for certain airports, he noted, but IATA wants them to “implement much broader financial support” packages that include direct financial assistance, loans or tax relief. “There is no one-size-fits-all solution.”

On Monday, the trade group representing major U.S. airlines requested almost $60 billion in grants and loans, as well as tax relief, saying the industry is facing a situation “much worse” than after the terrorist attacks of Sept. 11, 2001.

So far, the administration appears to be readying a stimulus plan worth at least $850 billion and likely to exceed $1 trillion. Nothing is set in stone, but it’s expected to include at least $50 billion for the U.S. airline industry, likely a combination of direct assistance and loan guarantees.

“If we want to maintain a strong [global] airline sector able to cope with this difficult crisis, but able also to provide the resources to ensure that the recovery will happen in due time … we need government to act strongly and quickly,” de Juniac said Tuesday, also warning that the crisis may lead to consolidation.

Brian Pearce, IATA’s chief economist, said the outbreak is “covering markets which represent … 94 percent of global passenger revenue, so this is now impacting the entirety of air transport.”

“In many cases, demand … for the business of many airlines has fallen to zero,” Pearce said, adding that new travel restrictions are exacerbating damage already caused by the outbreak.

Earlier this month, IATA said there could be up to $113 billion in passenger revenue losses this year worldwide. The group didn’t provide an updated estimate Tuesday, but Pearce said the numbers are “clearly worse than this, particularly in Europe and particularly in the Americas.”

As their revenues are taking a hit, “the vast majority” of carriers around the world “have high levels of debt,” Pearce noted, which is resulting in a “liquidity crisis.” At the beginning of the year, “more or less 75 percent of the airlines that we looked at … had less than three months of cash and equivalents” to cover fixed costs.

“Even before COVID, the industry was in a fairly fragile position,” Pearce said. “Only 30 airlines drove the improvement in profitability that we saw in the last 10 years. There was a long tail of airlines with much more fragile finances.”

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