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Billions Continue to Flow Out of the Cash at Airlines

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Airlines are still “burning” tens of billions of euros in the second half of this year due to the corona crisis.

 

According to the international trade association IATA, in the last six months of the year, it is expected that 77 billion dollars more will flow out of the cash than is received.

Because the demand for air travel is only slowly recovering after previous travel restrictions, 5 billion to 6 billion dollars will still flow out of the cash next year.

In the second quarter, when global borders closed and hardly any planes took off, airlines already consumed $ 51 billion. Despite easing, the so-called “cash burn” continued in the summer months.

Typically, airlines build up additional capital reserves in the busy summer months, which they use in the less active winter months. Because far fewer flights were operated in the spring and summer, airlines are now entering the low season without buffers, warns IATA CEO Alexandre de Juniac.

In order not to collapse airlines, additional support is needed, according to IATA. Previously, governments have already come to the aid of airlines with wage subsidies, tax relief or credit. Together, those measures were worth $ 160 billion. Sister airlines KLM and Air France received emergency loans and credit guarantees from the Dutch and French governments.

The aviation lobby now mainly alludes to financial aid from the government that does not further increase the debt burden. This would primarily result in capital investments whereby governments buy shares from airlines.

Air France-KLM already indicated at the end of July; it would probably issue new shares to weather the crisis. This could have political consequences because both the French and the Dutch state both have an interest of approximately 14 percent in the aviation group to defend national interests.

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