Covid-19 has caused the biggest crisis the airline industry has ever faced and it will never be the same again, according to Alexandre de Juniac, the International Air Transport Association (Iata) director general and CEO.
“We have never shut down the industry on a global scale before. Once reopened it will be a challenge adapting the industry to post-Covid-19 realities. Having gone through the pain of shutting down economies to fight the virus, governments will not accept the risk of reinfection. We see this in the severe measures that China has introduced to limit international flights. It is more restrictive now than it was at the height of the Covid-19 crisis in the country.”
He said while connecting cities by air would be critical for the recovery – especially considering that 35% of international trade was by air – the impact of the virus on the air industry had been devastating and it was running out of cash quickly which made recovery near impossible.
“The industry is burning through cash at a dangerous rate. Some $61 billion could disappear from cash reserves in the second quarter alone. Demand is in free-fall. Worldwide it’s down 70% compared to last year—90% in Europe and Africa. And it could even get worse.” De Juniac said there were no words that could adequately describe how deeply this crisis was impacting aviation.
But, he warned, if aviation was not functioning, the economic damage would be felt well beyond the sector itself.
“Many businesses have been ordered to close or cease operations—airlines, restaurants, tourist attractions and hotels among them. And if global supply chains are broken, others in manufacturing or retail will not have anything to make or sell,” he said. “Governments acting on the guidance of health authorities will determine when the lockdowns and travel restrictions can safely end. When that decision is taken, the air transport sector needs to be ready to deliver the people and goods that are required for many businesses to start operating normally again.”
Delivering this, however, was looking increasingly difficult. According to Brian Pearce, Iata chief economist, prior to the current crisis the average median airline only had two months of cash reserve available. Without government bail-out and relief many airlines around the world faced closure within the next few months.
“We are not expecting to re-start the same industry that we closed a few weeks ago. Airlines will still connect the world. And we will do that through a variety of business models. But the industry processes will need to adapt.”