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IATA warns that 1.3 million airline jobs at stake as failures to reduce cash burn bite deeper

©AirTeamImages

The International Air Transport Association has warned that without government intervention and opening up of international borders, over 1.3 million airline jobs are at stake, with a further 3.5 million jobs in the aerospace sector also at risk.

Earlier predictions that the signs of recovery would be seen in the fourth quarter of the year have failed to ring true and 2021 predictions have now been altered from a projected 29% drop in revenue to a 46% drop, compared to 2019 figures. For 2020 IATA anticipates full-year traffic will be down 66% compared to 2019.

“The fourth quarter of 2020 will be extremely difficult and there is little indication the first half of 2021 will be significantly better, so long as borders remain closed and/or arrival quarantines remain in place. Without additional government financial relief, the median airline has just 8.5 months of cash remaining at current burn rates. And we can’t cut costs fast enough to catch up with shrunken revenues,” said Alexandre de Juniac, IATA’s Director General and CEO.

Although airlines have taken drastic steps to reduce costs, around 50% of airlines’ costs are fixed or semi-fixed, at least in the short term. The result is that costs have not fallen as fast as revenues. For example, the year-on-year decline in operating costs for the second quarter was 48% compared with a 73% decline in operating revenues, based on the IATA sample of 76 airlines. As airlines have reduced capacity (available seat kilometers, or ASKs) in response to the collapse in travel demand, unit costs (cost per ASK, or CASK) have risen, since there are fewer seat kilometers to ‘spread’ costs over. IATA estimates that to achieve a breakeven operating result and neutralize cash burn in 2021, unit costs will need to fall by 30% compared to average CASK for 2020.

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