Airlines to suffer severe cash burn in Q2 — IATA

Richmond Mercurio (The Philippine Star) - April 2, 2020 - 12:00am

MANILA, Philippines — Airlines are far from getting over the hump as they are expected to face severe cash burn in the second quarter, according to the International Air Transport Association (IATA). In a report, IATA said that airlines may use up their $61 billion cash reserves in the second quarter.

IATA said cash burn would be severe for the April to June period as airlines are faced with refunding sold, but unused tickets due to massive cancellations on top of unavoidable costs.

Changes to revenues and costs are also likely to result in an estimated quarterly net loss of $39 billion, it said.

 “Airlines cannot cut costs fast enough to stay ahead of the impact of this crisis. We are looking at a devastating net loss of $39 billion in the second quarter,” IATA director general and CEO Alexandre de Juniac said.

“The impact of that on cash burn will be amplified by a $35 billion liability for potential ticket refunds. Without relief, the industry’s cash position could deteriorate by $61 billion in the second quarter,” he said.

IATA said its latest analysis is based on the impact assessment it released last week, under a scenario in which severe travel restrictions last for three months.

In such scenario, full-year demand falls by 38 percent and full-year passenger revenues drop by $252 billion compared to 2019.

The decline in demand would be the deepest in the second quarter, with a 71 percent plunge.

IATA has sent letters to the heads of government of 18 states in Asia-Pacific, including the Philippines, to appeal for emergency support to airlines as they fight for survival due to the dramatic loss of air travel demand due to the coronavirus disease 2019 or COVID-19 outbreak. 

In the Philippines, the Air Carriers Association of the Philippines (ACAP) has also asked the government for assistance in the form of relief on current working capital credit lines, emergency lines of credit for six months, longer term facility and waiver of all navigational and airport charges.

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