IconApril 28th, 2020
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IATA says Shutdown to cost European airlines $89 billion

The IATA is predicting a 55% reduction of annual revenue against 2019, a hit of $89 billion. This represents an increase of $13 billion against its estimate from 24 March and assumes severe travel restrictions for three months with the gradual lifting of measures coming after.

This is an increase in the association’s estimate of the cost of the COVID-19 pandemic crisis to European airlines, and it now believes that the crisis will cut the sector’s 2020 earnings by more than half.

“This would result in a $452 billion impact on the wider economy, IATA warns. “We are entering a very damaged phase for European air connectivity,” says IATA’s regional vice-president for Europe, Rafael Schvartzman.

The vice president notes that at the beginning of the crisis, IATA estimated that European airlines have just two months of liquidity available on average. Since then many airlines have received financial assistance, but not all have been able to do so. Hence, it is “vital that government accelerate plans to support the industry,” adds Schvartzman.

IATA is urgently requesting greater flexibility on refunds, as well as financial assistance. Schvartzman notes that European airlines customers for canceled flights amounting up to $10 billion. IATA acknowledges that to refund customers in seven days, as currently stated, is placing airlines under extreme financial stress as they are desperately trying to shore up cash reserves, but it is not refuting the need to reimburse customers. “We know this is controversial, but we need to look at the bigger picture.”

While airlines need help in preparations for returning to the skies, IATA argues that this help should include confidence-building measures, harmonized global standards, and a recognition that governments must draw on airlines’ operational expertise. There should also be a clear exit strategy from any additional measures that may be mandated.

“The world will rely on airlines and air connectivity to restore the global economy,” Schvartzman says. “A successful restart of the industry will be crucial. To help with that, IATA is hosting a series of regional summits to bring governments and key stakeholders together, to maximize the chances of an orderly restart.”

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