Airlines will be left with no choice but to cut jobs to stave off bankruptcy as the coronavirus crisis continues to bite, Iata has warned.
New analysis by the association suggests airlines won’t be able to cut costs sufficiently to negate cash burn without laying off more staff.
Iata on Tuesday (27 October) reiterated its call for further government relief for airlines to avoid "massive" job losses, with the sector likely to see revenue cut in half.
The association believes total 2021 revenues will come in some 46% down compared with 2019’s $838 billion.
This is down another 17% on the 29% decline on 2019 forecast earlier this year, which was based on a recovery in demand starting in Q4 2020.
However, fresh outbreaks of Covid-19, mitigated by government travel restrictions and quarantine measures, have pushed this recovery back to such an extent that Iata now expects air traffic in 2020 to be down two-thirds (66%) on 2019 demand.
“The fourth quarter of 2020 will be extremely difficult, and there is little indication the first half of 2021 will be significantly better, so long as borders remain closed and/or arrival quarantines remain in place," said Iata director general and chief executive Alexandre de Juniac.
"Without additional government financial relief, the median airline has just 8.5 months of cash remaining at current burn rates. And we can’t cut costs fast enough to catch up with shrunken revenues."
Iata reports around 50% of airlines costs are either fixed or semi-fixed, at least in the short-term, meaning costs are not falling as fast as revenues.
Based on a sample of 76 airlines, Iata found second-quarter operating costs were down 48% on 2019 – significantly outweighed by a 73% decline in operating revenue.
Additionally, as airlines have reduced capacity, unit costs have risen as these costs must be spread across fewer seats; third-quarter unit costs are understood to be up around 40% on levels from the same period last year.
Iata believes these costs will need to fall by about 30% to allow operations to break even and neutralise cash burn.
“There is little good news on the cost front in 2021," said de Juniac. "Even if we maximise our cost cutting, we still won’t have a financially sustainable industry in 2021.
“The handwriting is on the wall. For each day the crisis continues, the potential for job losses and economic devastation grows. Unless governments act fast, some 1.3 million airline jobs are at risk.
"And that would have a domino effect putting 3.5 million additional jobs in the aviation sector in jeopardy along with a total of 46 million people in the broader economy whose jobs are supported by aviation."