13 APRIL 2020
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Rafael Schvartzman is IATA’s regional vice president for Europe, overseeing 55 countries across Europe and Central Asia. He leads IATA’s activities in the region, building and strengthening strategic relationships with aviation stakeholders, advocating for the industry on behalf of IATA’s members, implementing new products and services, and presiding over the settlement systems for carriers in the region.
Rafael’s career with IATA began in 2005 in Buenos Aires, as country manager for Argentina, Uruguay and Paraguay. His aviation expertise also includes a ten-year tenure at DHL in the Americas and experience working for a range of air transport companies in South America.
Until just a few weeks ago most of us took the freedoms we all had to travel for granted. Whilst Asian and Chinese markets have felt the effect of COVID-19 since January, very few could have predicted the rapid, global, escalation of the crisis we now find ourselves in.
Globally we are experiencing an almost total loss in demand for air travel caused by government imposed restrictions to travel, rightly designed to combat the spread of COVID-19 but the economic damage to all industries and employment is plain to see. IATA’s own estimates are that industry passenger revenues could plummet by $252bn (£206bn) or 44% below 2019’s figure. Whichever way you cut the data, the figures are startling and unprecedented.
To provide some context for the UK market, our analysis suggests there could be 113.5m fewer passengers travelling through the UK this year – a drop of more than a third compared to 2019 figures. If this scenario was to pass, it would result in a £17.7bn revenue loss, putting at risk almost 402,000 jobs and around £26.6bn in contribution to the UK economy.
Aviation has always been an engine of economic growth and it will be a critical catalyst for the economic rebuilding when global travel restrictions start to be lifted. Governments globally need to step up and support this industry – they are first and foremost managing a medical emergency but they also need to plan for the future economic recovery. IATA believes that industry support must be given more urgent consideration at the highest levels of government.
That is not to say credit shouldn’t be given to the UK Government for the measures it has already taken to support the wider economy. Provisions to cover 80% of the salary of furloughed staff are hugely significant and welcome. They have provided a lifeline to the fantastic professional people who make air travel happen. But the government must go further. At a time when governments across the globe are stepping in to support their aviation industries with measures unimaginable only a few weeks ago, we are concerned the UK is falling behind other major economies.
By way of comparison, the US government are offering their carriers access to US$29bn in loans; the Australian government has announced a AU$715m relief package for its aviation industry and New Zealand’s government are offering the sector NZ$1500m in loans and relief. In Europe, Scandinavian countries are leading the way with a series of robust rescue packages for the aviation industry.
This means for the UK to retain its status as the largest aviation market in Europe and third largest globally, government must step in to match competitors by putting together a package of support to the industry, to properly reflect the importance of the UK air transport industry.
Once the threat of the virus has subsided, air connectivity will be essential in jump starting the global economy – every job created in the aviation industry supports another 24 jobs in the wider economy. But without help now, airlines will not be in a strong position to play their role in facilitating an economic recovery. Our most recent analysis shows that airlines may burn through $61bn of their cash reserves during the second quarter ending 30 June 2020. This includes liability for potential ticket refunds worth $35bn in sold-but-unused tickets as a result of massive flight cancellations owing to government-imposed travel restrictions. To ensure cash burn is reduced and airlines maintain the liquidity they need at this critical moment, government must now use every policy lever at its disposal.
Once the more immediate liquidity concerns have been addressed, government must look to address the sector’s longer-term recovery. To this end, consideration should be given to reductions or deferrals of aviation taxes and regulatory charges for the remainder of 2020. One of the simplest, effective and most immediate measures Government could take would be to introduce an immediate waiver from Air Passenger Duty (APD) for at least the next six months. This would be in addition to government backed sector specific loan facilities and guarantees as other states have.
Aviation is a resilient industry and recovery will come, but at present airlines are doing everything they can to secure their own futures. However, sometimes this is not enough. Now, more than ever, airlines need Government support. With decisive action by governments we can get through this crisis and keep the world connected."
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