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Airlines Say Survival Depends On Bailouts, Reopened Borders

FreightWaves

The International Air Transport Association (IATA) is frustrated that governments aren't doing more to help the airline industry survive the coronavirus pandemic. It is pleading for quick reopening of borders and assistance to help airlines maintain liquidity.

International passenger demand fell 91.9% in July compared to the same month last year — a slight improvement from the 96.8% contraction the industry recorded in June. International capacity fell 85.2% year-over-year. Overall, global passenger demand was only a fifth of last year's level, IATA reported. And air cargo demand was 13.5% lower in July on a yearly basis.

"Too many governments are fighting a global pandemic in isolation with a view that closing borders is the only solution. It's time for governments to work together to implement measures that will enable economic and social life to resume, while controlling the spread of the virus," Director General Alexandre de Juniac said in remarks Tuesday to journalists.

Restrictions are playing havoc with travel demand, making it difficult for airlines to generate revenue, he complained. 

Aggressive testing and quarantine measures in Hong Kong for passengers and crews, for example, underscore the challenge faced by airlines. United Airlines (NASDAQ: UAL) is making technical stops in Guam and Tokyo to change crews. Other airlines have cut back or suspended activity there, while some pilots at UPS and FedEx are asking not to fly to the city.

A couple of countries make it difficult for crews to stay, but "we hope we can fly straight to these countries because it's much more cost-effective," Jan Krems, president of United Airlines Cargo, told FreightWaves.

De Juniac noted that the International Civil Aviation Organization, with the help of the World Health Organization, has developed a road map for governments and the airline industry to implement common, mutually accepted health safety measures for the phased return of domestic and international air transport. The "Take-off Guidance" is designed to have governments follow a common framework so airlines don't face a patchwork of restrictions that complicate operations.

"Airlines have been largely grounded for a half-year. And the situation is not improving. In fact, in many cases it is going in the wrong direction," he said. "We see governments replacing border closures with quarantine for air travelers. Neither will restore travel or jobs. Worse, governments are changing the entry requirements with little notice to travelers or coordination with their trading partners. This uncertainty destroys demand. 

"Ten percent of the global economy is sustained by travel and tourism; governments need to do better to restart it," said de Juniac.

IATA is also proposing travel bubbles, or corridors, to minimize risk between specific markets, especially as COVID-19 testing improves in accuracy and scale.

"No government wants to import COVID-19. Equally, no government should want to see the economic hardships and associated health impacts of mass unemployment. Successfully getting through this crisis requires careful risk management with effective measures. If government policies focus on enabling a safe restart, aviation is well prepared to deliver. Risk management is a well-developed discipline that airlines rely on to keep travel safe and secure," the director general said.

Financial relief

The airline industry is facing an estimated $84 billion in losses and a 50% cut in revenues this year despite extraordinary steps to reduce expenditures. Some governments, such as Germany, the Netherlands, France, Austria and the U.S., provided aid packages for domestic carriers, but initial grants are running out.

In the U.S., for example, airlines could eliminate more than 50,000 jobs by Oct. 1, when federal payments to protect payrolls and benefits expire. Tens of thousands of workers have already left the industry through voluntary separation agreements. On Wednesday, United Airlines informed employees that it plans to cut 16,000 jobs, about 20,000 fewer than originally estimated because so many workers signed up for unpaid leave or buyouts.

Airlines and unions are pressing Congress for a second round of direct aid to preserve jobs through March, but prospects are dim at the moment, with Republicans and Democrats far apart on a broader economic stimulus plan that would incorporate airline relief.

Airlines deserve financial relief because tens of millions of jobs are indirectly tied to the industry and air transport will be crucial to helping restore global economic health, de Juniac said. 

The IATA chief reiterated a call for governments to waive rules at busy airports that require airlines to 80% of their allocated takeoff and land slots or risk losing them. Airlines can't fill their quota under current conditions and need flexibility to adjust schedules to meet demand without the pressure of being penalized for not using their slots. Forcing airlines to fly mostly empty aircraft to maintain valuable slots would further jeopardize airlines financially, he said. 

Many governments, including China, Brazil, Mexico, Singapore, Australia and New Zealand, have granted waivers for the winter 2020 season, which lasts through March. IATA complained that the European Commission, which many countries look to for leadership on air transport policy, "is underestimating the severity of the crisis and dragging its feet." Waiting until October to grant a waiver doesn't provide airlines the certainty they need to plan operations, it added.

​​Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

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Photo: Flickr/Mark Hodson

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