The International Air Transport Association (IATA) published new analysis showing that airlines may burn through $61 billion of their cash reserves during the second quarter ending 30 June 2020, while posting a quarterly net loss of $39 billion.
This analysis is based on the impact assessment IATA released last week, under a scenario in which severe travel restrictions last for three months. In this scenario, full-year demand falls by 38% and full-year passenger revenues drop by $252 billion compared to 2019. The fall in demand would be the deepest in the second quarter, with a 71% drop.
IATA said that on top of unavoidable costs, airlines are faced with refunding sold but unused tickets as a result of massive cancellations resulting from government-imposed restrictions on travel. The second quarter liability for these is a colossal $35 billion.
“Cash burn will be severe. We estimate airlines could be burning through $61 billion of their cash balances in the second quarter,” said IATA in a statement.
“Airlines cannot cut costs fast enough to stay ahead of the impact of this crisis. We are looking at a devastating net loss of $39 billion in the second quarter.
The impact of that on cash burn will be amplified by a $35 billion liability for potential ticket refunds. Without relief, the industry’s cash position could deteriorate by $61 billion in the second quarter,” said Alexandre de Juniac, IATA’s chief executive.