Airlines May Burn Through $61 Billion Cash Reserves in Q2

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The International Air Transport Association (IATA) is further estimating the losses global airlines will suffer due to grave impact of the coronavirus on air travel.

According to the recent analysis, airlines may collectively burn through $61 billion of their cash reserves during the second quarter of 2020, where quarterly net loss could result in $39 billion. The decrease in demand during the second quarter is expected to reach 71%.

In addition to that, the second quarter would severely hit airlines’ cash reserves due to the necessity to refund sold but unused tickets. IATA says that the “second quarter liability for these is a colossal $35 billion”.

Therefore, airlines are in a huge need of the governmental support to protect their operations and stay afloat. Although air carriers are cutting costs everywhere and by every mean they can, trying to secure working places, it is not enough.

“Airlines need working capital to sustain their businesses through the extreme volatility. (…) When the public health crisis abates to the level where it is safe re-start the economy, the airlines must be ready to go. The recovery will be slower and much more painful if airlines are not able to support trade and tourism”, IATA adds.

The new calculations are based on the scenario in which travel restrictions last only for three months. In this case, IATA estimates that annual demand for air travel will drop by 38%, meanwhile full-year passenger revenues will drop by $252 billion compared to 2019.