Airlines must brace for a cruel winter, warns IATA

Published: 20 June 2020 - 3:30 a.m.
By: Hotelier Middle East Staff
The International Air Transport Association (IATA) has warned that the airline industry faces a hard winter ahead and has called on governments to continue providing relief measures.

IATA has urged that the bulk of carriers make their money in the summer months, with the winter season notoriously struggling to turn a profit.

For example, the 2019 net profit margin for European airlines followed the normal seasonal pattern and was 9% and 17% respectively in Q2 and Q3 (northern summer). But it started at -1% in Q1 and finished the year at 2% in Q4 (northern winter). The winter season will be even more challenging amid the recovery from COVID-19.

“People are returning to the skies but the horizon of uncertainty of the COVID-19 crisis is extending. Forward bookings are down, and people are hedging their travel bets by booking closer to the time of travel. Airlines in the Northern hemisphere rely on a strong summer season and a predictable booking curve to get them through the lean months. But neither of these conditions are in place and airlines will need continued help from governments to survive a hard winter. Airlines will need much more flexibility to plan schedules around these changing consumer trends. Financial and operational flexibility equals survival,” said IATA director general and CEO Alexandre de Juniac.

IATA recommends governments continue with financial assistance, extensions to wage subsidies and corporate taxation relief, and avoid increasing industry charges and fees.

“Each day sees more people travelling. That’s good for the economy. The numbers are moving in the right direction, but we are by no means anywhere near normal or sustainable levels of activity. Financial relief measures are still desperately needed. And policy-relief measures like a slot usage waiver remain critical. Governments need to grant that by no later than the end of July to provide at least that certainty for this beleaguered and battered industry,” said de Juniac.

The knock-on effects of COVID-19 mean that airlines are projected to lose US$84.3 billion this year, with many airlines relying heavily on government aid to avoid collapse.

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