Business

Airlines warn of more bankruptcies as wage support ends

Airlines consumed $51 billion in cash in the second quarter as the pandemic brought global travel to a near-standstill

Passenger planes parked on a runway are seen during a general quarantine amid the spread of the coronavirus disease (COVID-19), at the Arturo Merino Benitez International Airport, in Santiago, Chile. Photo: Reuters/Ivan Alvarado/File Photo

Global airlines warned on Tuesday that the coronavirus-stricken industry was on course to burn through another $77 billion in cash in the second half of 2020, calling on governments to renew expiring wage support programs.

“The issue now is that aid, particularly the wage subsidies, is starting to be withdrawn,” Brian Pearce, chief economist at the International Air Transport Association (IATA), told reporters.

Airlines consumed $51 billion in cash in the second quarter as the pandemic brought global travel to a near-standstill, the industry body said.

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The call for increased support came as U.S. airlines begin furloughs of more than 32,000 workers amid fading hopes for a new federal bailout package. Wage support programs are also tapering off in Europe and elsewhere.

Whereas the withdrawal of subsidies makes sense for sectors in recovery, IATA warned of further airline bankruptcies in the northern hemisphere winter as the collapse in revenue continues to dwarf cost savings. The average carrier now has cash for 8.5 months of operations, Pearce said.

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We’re facing some tough winter months for airlines when cash flows are always seasonally weak. We’re looking (at) airlines getting into trouble if not failing without either further government support or (being) able to access capital markets for more cash

Brian Pearce, chief economist at IATA.

Airlines are pushing for a global system of pre-flight COVID-19 tests to replace quarantines and travel restrictions they blame for worsening the travel collapse.

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