According to analysis by the International Air Transport Association (IATA) the impact of COVID 19 on the aviation sector could see total debt balloon to $550 billion by the end of 2020 – a $120 billion in increase on the start of the year.
According to IATA $67 billion of the new debt is composed of government loans ($50 billion), deferred taxes ($5 billion) and loan guarantees ($12 billion) while $52 billion is from commercial sources including commercial loans ($23 billion), capital market debt ($18 billion), debt from new operating leases ($5 billion), and accessing existing credit facilities ($6 billion).
IATA said that while financial aid is a lifeline to get through the worst of the crisis without folding operations the 28% increase in debtload would impair moves to restart the industry.
“Government aid is helping to keep the industry afloat. The next challenge will be preventing airlines from sinking under the burden of debt that the aid is creating,” said Alexandre de Juniac, IATA’s chief executive.
“Over half the relief provided by governments creates new liabilities. Less than 10% will add to airline equity. It changes the financial picture of the industry completely. Paying off the debt owed governments and private lenders will mean that the crisis will last a lot longer than the time it takes for passenger demand to recover,” said de Juniac.