Europe Could Lose $378bn Unless It Supports Its Airlines

A new report released by IATA today has forecast a grim future for European airlines, and for Europe as a region. The association says that as much as $378bn of GDP could be lost if Europe’s governments don’t move to support their airlines now, a situation that could cost the region as many as 5.6 million jobs.

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IATA is calling on European governments to support airlines now, before it’s too late. Photo: Getty

IATA forecasts the damage

The International Air Transport Association (IATA) is forecasting massive losses for the European aviation sector in a new report released today. The association warns that Europe’s airlines could lose as much as $76bn in passenger revenue over the course of 2020, and that Revenue Passenger Kilometers (RPK) will be down some 46% below 2019 levels.

More crucially than that, IATA has outlined the impact that this reduction in air transport will have on the nations those airlines support. In its assessment, it claims that as many as 5.6 million jobs could be put at risk, and the decline would lead to a loss of $378bn in GDP.

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Airlines all over Europe have been grounding their fleets. Photo: Getty

As well as this new report, IATA is reported by Reuters to have written an open letter to the G20 leaders as they meet today. In the letter, it called upon governments to provide or facilitate financial support for the airline industry. Chief Executive Alexandre de Juniac wrote in the letter,

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“The spread of the COVID-19 pandemic around the globe and the resulting government-mandated border closings and travel restrictions have led to the destruction of air travel demand.”

A $33bn loss to the UK

IATA’s report drilled down to a country level what such a decline would do to its economy. France, it said, would be risking a revenue loss of $12bn, leading to a GDP loss of as much as $28.5bn. Italy, it said, would lose $9.5bn in revenue, leading to a $67.4bn loss to the economy.

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Germany would be losing $15bn of revenue and $28bn in economic contribution, while Spain would be looking to lose $13bn in revenue, but $49.4bn in revenue for the country.

However, the loss to carriers of the UK was the greatest, at $21.7bn in passenger revenue. Although this was highest, the $32.7bn economical loss, while still incredibly significant, was eclipsed by the losses for Italy and Spain.

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The UK government says there will be no bailout for airlines. Photo: Getty

The big difference here is that Spain and Italy have already acted. They, along with governments in Norway, Sweden and Finland, have issued definitive support packages for airlines, delivering financial relief where it is needed most.

The UK, in contrast, is yet to propose any airline support. In fact, UK chancellor Rishi Sunak said yesterday that there would be no blanket bailout for airlines, now or in the future.

Relief and financial support

IATA is calling for two key measures to be taken by European governments and regulators to prevent the collapse of the airline industry. The first is financial support, which would be implemented at a governmental level, while the second involves relief measures, something for which regulators are in the driving seat.

Under the heading of financial support, IATA is asking governments to consider a combination of solutions, which could include direct financial support, loans and loan guarantees as well as tax relief for airlines.

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IATA wants both governments and regulators to move to protect airlines. Photo: Getty

In terms of relief measures, IATA wants to see regulators instigating temporary amendments to EU261 passenger rights rules. Within this, it calls for vouchers to be allowed instead of cash refunds, and more short term flexibility for airlines.

It would also like to see regulators providing a package of measures to ensure air cargo operators have an easier time. This may include the removal of barriers such as overflight charges, parking costs and slot restrictions, as well as fast track procedures for overflight and landing rights acquisition.

Rafael Schvartzman, IATA’s Regional Vice President for Europe commented on the report, saying,

“The air transport industry is an economic engine, supporting up to 12.2 million jobs across Europe and $823 billion in GDP. Every job created in the aviation industry supports another 24 jobs in the wider economy. Governments must recognize the vital importance of the air transport industry, and that support is urgently needed.

“First, this will keep airlines financially viable during the present lockdown, preserving jobs, maintaining essential connections to repatriate citizens, and carrying life-saving air cargo supplies. Secondly, this would avoid broad economic damage by ensuring that airlines can rapidly scale-up operations when travel restrictions are lifted, jump-starting the European and global economies.”

While the majority of interest right now is focused on which airlines are cutting capacity and where, increasingly, attention is being turned to what aviation will look like when we come back from this. Healthy airlines are going to be key to economic recovery, not just in Europe but all over the world, and without the support of their respective governments, there may be no airlines left to carry us out of recession.

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Timo

Goverments should support the companies now. All countries could get the money back afterwards by common 10% aviation tax starting in 2021.

Dave

Britain is right in not supporting private airlines. All these British airlines have shareholders, so it should be up to those shareholders to keep the airlines ticking over. The British government have already commited to paying 80% of salaries, so why should the British taxpayer (government) pay towards the cost of leasing aircraft and maintaining exessive high corporate pay salaries?