Airlines hit wall of debt after COVID grounding

File: Ahead of a return to normal service, many carriers are weighed down by debt as they seek to take wing when mass demand finally takes off again.

File: Ahead of a return to normal service, many carriers are weighed down by debt as they seek to take wing when mass demand finally takes off again.

AFP/William West

PARIS - Their fleets grounded for months owing to the coronavirus, airlines have sought with varying degrees of success state assistance to avoid going under altogether.

But ahead of a return to normal service, many carriers are weighed down by debt as they seek to take wing when mass demand finally takes off again.

The forecast is for exceptionally cloudy skies with the International Air Transport Association in April saying passenger demand had plummeted 94.3 percent over early 2019 and warning receipts will more than halve this year.

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On Tuesday, IATA said its 290 member carriers were heading for a combined historic net loss of more than $84-billion this year after the world went into mass lockdown to limit the spread of COVID-19 and a further $15-billion next year.

Facing such losses, carriers have been queuing up for state support.

Governments have not turned a deaf ear, earmarking $123-billion to date, 67 billion of which will have to be reimbursed -- but the sector is set to burn through an estimated $60-billion of cash in the second quarter of 2020 alone.

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Although the support is more than small beer, IATA estimates the carriers' debt pile will hit $550-billion -- a rise of 28 percent compared with before the virus crisis broke and 92 percent of expected 2021 revenues.

"Where governments have not responded fast enough or with limited funds, we have seen bankruptcies. Examples include Australia, Italy, Thailand, Turkey, and the UK," notes IATA director general Alexandre de Juniac.

"Government aid is helping to keep the industry afloat. The next challenge will be preventing airlines from sinking under the burden of debt that the aid is creating," de Juniac added. 

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Industry experts do not expect traffic to return to 2019 levels before 2023.

"I am not optimistic that some of the carriers that are here today, that already have been significantly bailed out, will get through the next few months," said Tim Clark, head of Emirates, addressing the recent Arabian Travel Market, warning of "tough" months ahead.

Source
AFP