Aerospace

IATA calls for more state support for aviation

Posted 24 March 2020

The International Air Transport Association (IATA) has today welcomed the support of those governments around the world that have provided financial relief to airlines and urged other governments to follow suit before more damage is done.

Image courtesy Ricardo / copyright shutterstock

“Airlines are fighting for survival in every corner of the world. Travel restrictions and evaporating demand mean that, aside from cargo, there is almost no passenger business. For airlines, it’s apocalypse now. And there is a small and shrinking window for governments to provide a lifeline of financial support to prevent a liquidity crisis from shuttering the industry,” said Alexandre de Juniac, IATA’s Director General and CEO.

According to IATA’s latest analysis, released today, annual passenger revenues will fall by $252 billion if severe travel restrictions remain in place for three months. That represents a 44% decline compared to 2019. This is well-over double IATA’s previous analysis of a $113 billion revenue hit that was made before countries around the world introduced sweeping travel restrictions.

“It did not seem possible, but in a matter of days, the crisis facing airlines worsened dramatically. We are 100% behind governments in supporting measures to slow the spread of COVID-19. But we need them to understand that without urgent relief, many airlines will not be around to lead the recovery stage. Failure to act now will make this crisis longer and more painful. Some 2.7 million airline jobs are at risk. And each of those jobs supports a further 24 in the travel and tourism value chain. Some governments are already responding to our urgent calls but not enough to make up the $200 billion needed,” said de Juniac.

In urging more government action, de Juniac cited examples of state support:

Australia has announced an A$715 million (US$430 million) aid package comprising refunds and forward waivers on fuel taxes, and domestic air navigation and regional aviation security charges.
Brazil is allowing airlines to postpone payments of air navigation and airport fees.
China has introduced a number of measures, including reductions in landing, parking and air navigation charges as well as subsidies for airlines that continued to mount flights to the country.
Hong Kong Airport Authority (HKAA), with government support, is providing a total relief package valued at HK$1.6 billion (US$206 million) for the airport community including waivers on airport and air navigation fees and charges, and certain licensing fees, rent reductions for aviation services providers and other measures.
New Zealand’s government will open a NZ$900 million (US$580 million) loan facility to the national carrier as well as an additional NZ$600 million relief package for the aviation sector.
Norway’s government is providing a conditional state loan-guarantee for its aviation industry totaling NKr6 billion (US$533 million).
Qatar’s Minister of Finance has issued a statement of support for the national carrier.
Singapore has undertaken relief measures valued at S$112 million (US$82 million) including rebates on airport charges, assistance to ground handling agents, and rental rebates at Changi Airport.
Sweden and Denmark announced $300m in state loan guarantees for the national carrier.

In addition to this support, the European Central Bank, and the United States Congress are expected to enact significant measures to aid the airline industry in their respective jurisdictions as part of large packages of broader economic measures.

“This shows that states around the globe, recognise the critical role that aviation plays in the modern world. But many others have still to act to preserve the important role of this sector. Airlines are an economic and employment engine. This is demonstrated even as passenger operations shrink, as airlines continue to deliver cargo that is keeping the economy going and getting relief supplies where they are needed most. The ability for airlines to be a catalyst for economic activity will be vital in repairing the economic and social damage that COVID-19 is now causing,” said de Juniac.

IATA is calling for:

Direct financial support to passenger and cargo carriers to compensate for reduced revenues and liquidity attributable to travel restrictions imposed as a result of COVID-19;
Loans, loan guarantees and support for the corporate bond market by the Government or Central Banks. The corporate bond market is a vital source of finance, but the eligibility of corporate bonds for central bank support needs to be extended and guaranteed by governments to provide access for a wider range of companies.
Tax relief: Rebates on payroll taxes paid to date in 2020 and/or an extension of payment terms for the rest of 2020, along with a temporary waiver of ticket taxes and other government-imposed levies.

Support from UK Government
Meanwhile, Karen Dee, Chief Executive of the UK's Airport Operators Association responded to the UK Government’s decision not to support airlines and airports with one, comprehensive package but take a case-by-case approach instead, saying: “After having publicly announced a support package for airports and airlines, we’re surprised by where we find ourselves today. Our industry will now have to fight on its own to protect its workforce and its future.

“With passenger numbers approaching close to zero, UK airports have seen a major drop in revenue. They are taking unprecedented steps to safeguard airport staff and operations through this crisis, which could include in some cases considering shutting down for a period of time. This could have major impacts for UK communities and businesses.

“Even amidst the crisis, airports are continuing to provide lifeline services to the Highlands & Islands communities and the UK Crown Dependencies and freight services to ensure vital supplies (including medical supplies) arrive in the UK. They are also the base of operations for UK Search & Rescue operations, for offshore oil, gas and wind farms that provide vital energy supplies and they play a critical role in the management of UK airspace.

“All of that is now put at risk by the Government’s decision. While countries across Europe have recognised the vital role airports play and are stepping into the breach, the UK Government’s decision to take a case-by-case approach with dozens of UK airports is simply not feasible to provide the support necessary in the coming days.

“Not only does the decision today leave airports struggling to provide critical services, it will hamper the UK recovery. In addition to financial support, the support package should have included sector-wide regulatory alleviations, to reduce costs today and put in place the measures necessary to support airports, ground handling agents, air navigation service providers and others in their operational recovery once the pandemic recedes.

“We urge the Government to reconsider and at the very least provide a comprehensive package of support for airports and ground-based services, to ensure the UK’s critical aviation infrastructure is ready to take off once the COVID-19 pandemic recedes. This should include:

Increase the flexibility of the employment retention scheme to take account of the airport context, including for example around mandatory training and certification requirements and ability to maintain a skeleton staff to continue critical operations
Extending business rate relief to airports, airport retail and hospitality businesses and other airport support companies.
In addition to VAT deferral, deferral of all other taxes, such as corporation tax, for the duration of global flight restrictions.
Require banks and bondholders to temporarily not enforce financial performance-based banking covenants.
Suspend regulatory costs on airports where possible, including by deferring deadlines on mandated investments such as Next Generation security scanning equipment
Provide relief from airport policing costs.”

Tim Alderslade, Chief Executive of Airlines UK, the industry body representing UK-registered airlines, said: “We welcome the announcement that Government will enter into negotiations with individual airlines seeking additional bespoke support, recognising the fundamental importance of the aviation sector to the UK economy and the particular challenges faced by airlines in the face of travel restrictions that have all but eliminated airline revenue but not airline costs, which are substantial and not solely restricted to wages.

“It is essential that the economy-wide measures announced thus far are implemented as quickly as possible, with accompanying further guidance, to support airlines through this unprecedented period and, alongside any additional bespoke or sector-wide measures, enable aviation to support a strong UK recovery from the current crisis in the months ahead.”