Dubai PR Network, Online Press Release from Dubai and Middle East
 
Aviation, Airline & Aerospace(Travel & Tourism)
Filter PR by
  
Airline Debt to Balloon by 28%
 
-Heavy New Debt Levels Will Weigh Down Airline Recovery-
 
 
Dubai, United Arab Emirates, May 28, 2020:  The International Air Transport Association (IATA) released analysis showing that the airline industry’s global debt could rise to $550 billion by year-end. That’s a $120 billion increase over debt levels at the start of 2020. 
 
• $67 billion of the new debt is composed of government loans ($50 billion), deferred taxes ($5 billion) and loan guarantees ($12 billion).
• $52 billion is from commercial sources including commercial loans ($23 billion), capital market debt ($18 billion), debt from new operating leases ($5 billion), and accessing existing credit facilities ($6 billion). 
 
Financial aid is a lifeline to get through the worst of the crisis without folding operations. But during the re-start period later this year, the industry’s debt load will be near $550 billion—a massive 28% increase. 
 
“Government aid is helping to keep the industry afloat. The next challenge will be preventing airlines from sinking under the burden of debt that the aid is creating,” said Alexandre de Juniac, IATA’s Director General and CEO.
 
In total governments have committed to $123 billion in financial aid to airlines. Of this, $67 billion will need to be repaid. The balance largely consists of wage subsidies ($34.8 billion), equity financing ($11.5 billion), and tax relief / subsidies ($9.7 billion). This is vital for airlines which will burn through an estimated $60 billion of cash in the second quarter of 2020 alone.
 
“Over half the relief provided by governments creates new liabilities. Less than 10% will add to airline equity. It changes the financial picture of the industry completely. Paying off the debt owed governments and private lenders will mean that the crisis will last a lot longer than the time it takes for passenger demand to recover,” said de Juniac.
 
Regional variations
 
The $123 billion in government financial aid is equal to 14% of 2019’s total airline revenues ($838 billion). The regional variations of the aid dispersion indicate that there are gaps that will need to be filled.
 

 

2019 Revenues ($ billion)

Aid promised ($ billion)

% of 2019 Revenues

Global

$838

$123

14%

North America

$264

$66

25%

Europe

$207

$30

15%

Asia-Pacific

$257

$26

10%

Latin America

$38

$0.3

0.8%

Africa and Middle East

$72

$0.8

1.1%

 

 


There are still large gaps in the financial aid needed to help airlines survive the COVID-19 crisis. The US government has led the way with its CARES Act being the main component of financial aid to North American carriers which in total represented a quarter of 2019 annual revenues for the region’s airlines. This is followed by Europe with assistance at 15% of 2019 annual revenues and Asia-Pacific at 10%. But in Africa, the Middle East and Latin America average aid is around 1% of 2019 revenues.


“Many governments have stepped up with financial aid packages that provide a bridge over this most difficult situation, including cash to avoid bankruptcies. Where governments have not responded fast enough or with limited funds, we have seen bankruptcies. Examples include Australia, Italy, Thailand, Turkey, and the UK. Connectivity will be important to the recovery. Meaningful financial aid to airlines now makes economic sense. It will ensure that they are ready to provide job-supporting connectivity as economies re-open,” said de Juniac.


The Impact of Debt


The kind of aid provided will influence the speed and strength of the recovery. IATA urged governments still contemplating financial relief to focus on measures that help airlines raise equity financing. “Many airlines are still in desperate need of a financial lifeline. For those governments that have not yet acted, the message is that helping airlines raise equity levels with a focus on grants and subsidies will place them in a stronger position for the recovery,” said de Juniac.
“A tough future is ahead of us. Containing COVID-19 and surviving the financial shock is just the first hurdle. Post-pandemic control measures will make operations more costly. Fixed costs will have to be spread over fewer travelers. And investments will be needed to meet our environmental targets.  On top of all that, airlines will need to repay massively increased debts arising from the financial relief. After surviving the crisis, recovering to financial health will be the next challenge for many airlines,” said de Juniac.


Last week, the IATA Board of Governors committed to five key principles for the industry re-start.  Among these are commitments to the safety and security of staff and travelers, to meeting the industry’s environmental targets and to being a meaningful driver of the economic recovery with affordable connectivity. 

 


Posted by : Dubai PR Network Editorial Team
Viewed 4514 times
PR Category : Travel & Tourism
Posted on : Thursday, May 28, 2020  10:42:00 AM UAE local time (GMT+4)
Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of DubaiPRNetwork.com.
Previous Story : WTTC Launches Safe Travels Protocols for Aviation, Airports,...
Next Story : Al Majid Motors Announces the Arrival of All-New Kia K5 Fast...
Email this article Print this article

Share this article with your friends and followers
NewsVine
Back to Section Home

Related Stories



 
 
Most Viewed Press Release posted in the last 7 days
Let's Brigthen Up! The Face Shop's Ultimate Summer Skincare Range From Belif is Here! [4900-Views]
NUDESTIX Launches - Nudies Blush, Bronze, and Glow Shade Extension [4202-Views]
Crude Oil Headwinds on Virus and Technicals [3526-Views]
Preparing for a New Post-pandemic Economic Era in Mena [3432-Views]
Pan Emirates Unveils Exclusive New Collection [3018-Views]
Panasonic Jaguar Racing Management Team Discuss Formula E's Return to Racing in Berlin [2931-Views]
Code 11.59 by Audemars Piguet – New Tones of Elegance [2870-Views]
IATA Proposes Alternatives to Quarantine' [2694-Views]
IATA Proposes Alternatives to Quarantine [2587-Views]
“CATRICE” Perfect Look for “Back to the Office” [2267-Views]
Frontline Warriors and Volunteers from two Al Warsan isolation facilities honoured for hel... [2177-Views]
Transfast Partners with Habib Bank Limited (HBL) for Global Remittances [2169-Views]
Newest LG True Wireless Earbuds Self-clean, Sound Great With Meridian Audio [2079-Views]
Samsung launches its highly anticipated 2020 QLED 8K TV in the UAE [2079-Views]
Pandora ME for Every Side of You [2066-Views]
Parmigiani Fleurier Toric Fleur' [2025-Views]
District 2020 forms strategic partnerships with Dubai SME and MBRIF to support growth of U... [1759-Views]
New Report From Invesco Finds Record Usd15.4bn in Gold Purchased by Exchange Traded Produc... [1747-Views]
Kristina Fidelskaya - An Escape, With 'La Pause' Spring / Summer 2020 Collection. [1730-Views]
Smash Summer Fitness Goals with 100 Workout Modes on the HONOR MagicWatch 2 [1689-Views]
Your Guide to Choosing the Right Face Mask [1660-Views]
DP World Presents: Enabling Smarter Conversations Leadership in Unprecedented Times [1652-Views]
DHA Signs MoU with University of Sharjah [1644-Views]
A Lincoln That Gets You: How SYNC® Understands Your Commands [1628-Views]
Get Summer Ready With Magnitone London! [1628-Views]
 
RSS Facebook Twitter LinkedDin
 
Top Sections
 
Top Stories