IATA says airlines will post $39bn loss in Q2

The International Air Transport Association says airlines may burn through $61bn of their cash reserves during the second quarter ending 30 June, 2020 while posting a quarterly net loss of $39bn.

The association said on Tuesday that the new analysis was based on the impact assessment it released last week, under a scenario in which severe travel restrictions last for three months.

According to IATA, in this scenario, full-year demand falls by 38 per cent and full-year passenger revenues drop by $252bn compared to 2019 while the fall in demand will be the deepest in the second quarter, with a 71 per cent drop.

IATA said the impact would be severe as revenues were expected to fall by 68 per cent.

“This is less than the expected 71 per cent fall in demand due to the continuation of cargo operations, albeit at reduced levels of activity. Variable costs are expected to drop sharply—by some 70 per cent in the second quarter—largely in line with the reduction of an expected 65 per cent cut in second quarter capacity. The price of jet fuel has also fallen sharply, although we estimate that fuel hedging will limit the benefit to a 31 per cent decline,” the association said.

“Fixed and semi-fixed costs amount to nearly a half an airline’s cost. We expect semi-fixed costs (including crew costs) to be reduced by a third. Airlines are cutting what they can, while trying to preserve their workforce and businesses for the future recovery. These changes to revenues and costs result in an estimated net loss of $39bn in the second quarter,” it added.