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  • OTRI.USA
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  • OTVI.USA
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  • TSTOPVRPM.CHIATL
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  • TSTOPVRPM.LAXDAL
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  • TSTOPVRPM.LAXSEA
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    11,173.640
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  • OTRI.USA
    5.120
    0.130
    2.6%
  • OTVI.USA
    11,150.460
    -154.410
    -1.4%
  • TLT.USA
    2.560
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  • TSTOPVRPM.ATLPHL
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  • TSTOPVRPM.CHIATL
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  • TSTOPVRPM.DALLAX
    1.380
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  • TSTOPVRPM.PHLCHI
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Air CargoAmerican ShipperEconomicsNews

Airlines face $250 billion revenue hit in 2020, IATA says

Airlines stand to lose $252 billion if severe travel restrictions are in place for three months, more than double the International Air Transport Association’s  projection from earlier this month and 44% below 2019’s top-line, the trade group said Tuesday.

The economic analysis assumes there will be a global recession during, and after, the COVID-19 pandemic and that travel demand will be slow to recover later this year. 

Airlines have stopped flying all but a few international routes and have scaled back domestic networks as well, grounding thousands of planes.

The Seattle Times reported that Alaska Airlines, for example, will slice about 200 flights per day from its schedule through March, cease most operations to Hawaii and park 30 planes, as it implements downsizing announced last week.

The airline group’s worst-case estimate on March 5 of up to $113 billion in lost revenue came before countries introduced sweeping border closures.

IATA says airlines need an infusion of $200 billion in direct grants, loans and loan guarantees, as well as tax rebates and a temporary waiver of ticket taxes and other government-imposed fees. Congress is debating emergency relief for passenger and cargo airlines worth about $60 billion. The European Central Bank is also expected to enact measures to help the industry.

“Airlines are fighting for survival in every corner of the world. Travel restrictions and evaporating demand mean that, aside from cargo, there is almost no passenger business. For airlines, it’s apocalypse now,” IATA Director General Alexandre de Juniac said in a statement. “And there is a small and shrinking window for governments to provide a lifeline of financial support to prevent a liquidity crisis from shuttering the industry.”

U.S. airlines are trying not to furlough workers, but say that without government aid they will be forced to shrink their workforce. Based on their current operations, Delta Air Lines and United Airlines have about 60,000 and 40,000 more employees than they need. Delta has said it is burning through $50 million a day to keep most of its staff intact. 

The typical airline had two months worth of cash at the start of the year and will run out of money before the recovery starts, according to IATA Chief Economist Brian Pearce. Helane Becker, lead airline analyst at Cowen investment bank, said in a research note that it will take airlines 12 to 18 months to return to previous growth levels.

IATA estimates that traffic in 2020, measured by the number of passengers and distance flown, will decline 38% versus last year. Its modeling shows industry capacity 65% below the 2019 level at the end of June and recovering to 10% below last year’s total by the end of the year.

The trade group singled out several countries for efforts to support airlines through the crisis:

  • Australia has announced an A$715 million (US$430 million) aid package comprising refunds and forward waivers on fuel taxes, and domestic air navigation and regional aviation security charges. 
  • Brazil is allowing airlines to postpone payments of air navigation and airport fees.
  • China has introduced a number of measures, including reductions in landing, parking and air navigation charges as well as subsidies for airlines that continued to mount flights to the country.
  • Hong Kong Airport Authority (HKAA), with government support, is providing a total relief package valued at HK$1.6 billion (US$206 million) for the airport community, including waivers on airport and air navigation fees and charges, and certain licensing fees, rent reductions for aviation services providers, and other measures. Cargo terminal services, for example, will be reduced by 10% to 50% for three to four months.
  • New Zealand’s government will open a NZ$900 million (US$580 million) loan facility to the national carrier as well as an additional NZ$600 million relief package for the aviation sector.
  • Norway’s government is providing a conditional state loan guarantee for its aviation industry totaling NKr6 billion (US$533 million).
  • Singapore has undertaken relief measures valued at S$112 million (US$82 million) including rebates on airport charges, assistance to ground handling agents and rental rebates at Changi Airport.
  • Sweden and Denmark announced $300 million in state loan guarantees for the national carrier.

“It did not seem possible, but in a matter of days, the crisis facing airlines worsened dramatically. We are 100% behind governments in supporting measures to slow the spread of COVID-19. But we need them to understand that without urgent relief, many airlines will not be around to lead the recovery stage,” de Juniac said. “Failure to act now will make this crisis longer and more painful. Some 2.7 million airline jobs are at risk. And each of those jobs supports a further 24 in the travel and tourism value chain. Some governments are already responding to our urgent calls, but not enough to make up the $200 billion needed.”

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Eric Kulisch, Air Cargo Editor

Eric is the Air Cargo Market Editor at FreightWaves. An award-winning business journalist with extensive experience covering the logistics sector, Eric spent nearly two years as the Washington, D.C., correspondent for Automotive News, where he focused on regulatory and policy issues surrounding autonomous vehicles, mobility, fuel economy and safety. He won a regional Gold Medal from the American Society of Business Publication Editors for government coverage, and was voted best for feature writing and commentary in the Trade/Newsletter category by the D.C. Chapter of the Society of Professional Journalists. As associate editor at American Shipper Magazine for more than a decade, he wrote about trade, freight transportation and supply chains. Eric is based in Portland, Oregon. He can be reached for comments and tips at ekulisch@freightwaves.com

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