The International Air Transport Association (IATA) has published new analysis on the global aviation sector which indicated that airlines may “burn” through $61 billion of their cash reserves during the second quarter ending 30 June 2020.
The association, representing over 290 airlines globally, also projected a net loss of $39 billion in the quarter with airlines battling to refund sold but unused tickets.
The latest analysis is based on the impact assessment by IATA, under a scenario in which severe travel restrictions last for three months.
According to the association, in this scenario, full-year demand is projected to fall by 38% and full-year passenger revenues is expected to drop by $252 billion compared to 2019.
The association stated that the fall in demand would be the deepest in the second quarter, with a 71% drop while revenues are expected to fall by 68%, less than the expected 71% fall in demand due to the continuation of cargo operations, albeit at reduced levels of activity.
Also, variable costs are expected to drop sharply-by some 70% in the second quarter-largely in line with the reduction of an expected 65% cut in second quarter capacity.
The report stated: “The price of jet fuel has also fallen sharply, although we estimate that fuel hedging will limit the benefit to a 31% decline. Fixed and semi-fixed costs amount to nearly half an airline’s cost.
We expect semi-fixed costs (including crew costs) to be reduced by a third. Airlines are cutting what they can, while trying to preserve their workforce and businesses for the future recovery”, it added.
Commenting on the report findings, IATA’s Director-General, Alexandre de Juniac, said: “Airlines cannot cut costs fast enough to stay ahead of the impact of this crisis. We are looking at a devastating net loss of $39 billion in the second quarter.
“The impact of that on cash burn will be amplified by a $35 billion liability for potential ticket refunds. Without relief, the industry’s cash position could deteriorate by $61 billion in the second quarter”, he added.