At their latest media briefing, held on 7th April 2020, the International Air Transport Association (IATA) Director General and CEO, Alexandre de Juniac, shared new analysis showing that 25 million jobs are at risk of disappearing, due to a steep decline in demand caused by the COVID-19 crisis.
Air Travel Demand Down by 70%
Air travel demand dropped by 70% at the start of the second quarter, with airlines burning through an astonishing $61 billion in cash.
Cash Refunds Could Take Airlines to The Brink
With these, never before seen, statistics it might come as no surprise that airline finances are now so fragile they can’t afford to refund customers. De Juniac explained to reporters why customers should accept vouchers.
“The key element for [airlines] is to avoid running out of cash, so refunding the cancelled ticket for us is almost unbearable financially speaking.”
Alexandre de Juniac, IATA’s Director General and CEO
For cash strapped customers this will not satisfy everyone and rules in many parts of the world, such as EU261 in the European Union, require airlines to pay refunds in cash.
$35 Billion Due in Refunds
The IATA estimates that around $35 billion worth of tickets were due for refund by the end of the second quarter. With airlines at a high risk of going bust, if they pay the refunds in cash, the IATA has approached governments to ask them not to force airlines to provide cash refunds.
US airlines have been told they must refund tickets for flights that they cancel. Following a rising number of consumer complaints and inquiries; including a passenger who filed a class-action lawsuit against United Airlines, for refusing to pay a refund after his family’s flight was cancelled.
The fact remains that millions of jobs are on the line.
Global Breakdown of Potential Job Losses
Governing body IATA, whose members include the likes of Lufthansa and British Airway’s parent company IAG, shared further analysis, including a break down of where the 25 million aviation jobs could be lost.
- 11.2 million jobs in Asia-Pacific
- 5.6 million jobs in Europe
- 2.9 million jobs in Latin America
- 2.0 million jobs in North America
- 2.0 million jobs in Africa
- 0.9 million jobs in the Middle East
Government Help Needed
Globally, the livelihoods of 65.5 million people are dependent on the aviation industry. In order to save the industry, and save jobs, the IATA is fully in support of airlines calling on governments to provide immediate help including:
- Direct financial support
- Loans, loan guarantees and support for the corporate bond market
- Tax relief
Without government intervention the harsh reality is that airlines will fall, causing a stark impact on the world economy.
“There are no words to adequately describe the devastating impact of COVID-19 on the airline industry. And the economic pain will be shared by 25 million people who work in jobs dependent upon airlines. Airlines must be viable businesses so that they can lead the recovery when the pandemic is contained. A lifeline to the airlines now is critical.”
Alexandre de Juniac, IATA’s Director General and CEO
The IATA has also asked governments for a reduction of charges and taxes to help its members, who represent 82% of global air traffic, survive; they have also asked for funds to help restart routes in future.
European countries have already agreed to defer air traffic control charges, totalling 1.1 billion euros ($1.2 billion) from February to May.
Some environmental groups are seeing this as an opportunity to alter airlines’ environmental responsibilities (including Stay Grounded, who published an open letter signed by 250 environmental groups and charities from across Europe), calling for governments to attach climate and labour conditions to any airline bailouts.
Airlines have no blueprint for an ongoing crisis of this nature, nor the cash reserves. As highlighted by the IATA, without government help, it’s only a matter of time until we see airlines fall; which will cause a shock wave reaction throughout the travel sector.