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Airlines hinge survival on cash bailout, loan guarantees, rebates

By Wole Oyebade
27 March 2020   |   4:12 am
The global air travel industry has said that surviving the coronavirus pandemic crisis would depend on government’s support for airlines and other operators.

The global air travel industry has said that surviving the coronavirus pandemic crisis would depend on government’s support for airlines and other operators.

The airlines recently reviewed the cost of airspace shutdown, pushing the losses from potential $113 billion to $252 billion passenger revenue slump globally.

The airlines, under the aegis of the International Air Transport Association (IATA), said many airlines are on the brinks of collapse without an urgent support from their home governments.

According to IATA, supports can come from 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.

Similarly, IATA advocated 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.

IATA welcomed the support of those governments that had provided financial relief to airlines and urged other governments to follow suit before more damage is done.

The association that represents some 290 airlines had warned that Nigeria was at risk of losing 2.2 million overseas-bound passengers and $434 million of revenue, if the coronavirus spread continues to escalate. The National Association of Nigerian Travel Agencies (NANTA) had recorded over 4000 jobs and N180 billion losses.

IATA’s Director General and Chief Executive Officer (CEO), Alexandre de Juniac, said airlines are currently 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,” de Juniac said.

According to IATA’s latest analysis, released Tuesday, annual passenger revenues will fall by $252 billion if severe travel restrictions remain in place for three months. That represents a 44 per cent decline compared to 2019.

This is well-over double IATA’s previous analysis of $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 per cent 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,” de Juniac said.

President of the National Association of Nigeria Travel Agencies (NANTA), Bernard Bankole, added that the local industry risks a total collapse, except the Federal Government and the Central Bank of Nigeria (CBN) intervene with bailouts for travel agencies to avoid a default in the remittance of funds to IATA.

Bankole said: “We need a bailout from the government. It will enable us to access interest-free loans to augment our liabilities at this period. We are not asking anybody to come and dash us money. The circumstance has created a cash flow shortage whereby we cannot fulfill our obligations to the airlines through IATA when due. This puts everyone under a lot of pressure,” he said.