2020 State of Logistics: Airfreight Transportation

The International Air Transport Association (IATA) released an analysis in June showing that the airline industry’s global debt could rise to $550 billion by year-end. That’s a $120 billion increase over debt levels at the start of 2020.

“Government aid is helping to keep the industry afloat,” says Alexandre de Juniac, IATA’s director general and CEO. “The next challenge will be preventing airlines from sinking under the burden of debt that the aid is creating.” He adds that, in total, governments have committed to $123 billion in financial aid to airlines.

Of this, $67 billion will need to be repaid. The balance largely consists of wage subsidies ($34.8 billion), equity financing ($11.5 billion), and tax relief/subsidies ($9.7 billion). This is vital for airlines, which will burn through an estimated $60 billion of cash in the second quarter of 2020 alone.

However, de Juniac cautions that more than half the relief provided by governments creates new liabilities. “Less than 10% will add to airline equity,” he observes. “It changes the financial picture of the industry completely. Paying off the debt owed to governments and private lenders will mean that the crisis will last a lot longer than the time it takes demand to recover.”

Meanwhile, Airports Council International (ACI) World has recently published comprehensive guidance for airports as they prepare to restart operations to assist them in sustaining a business recovery during the pandemic.

“COVID-19 has been a truly unprecedented global challenge, particularly to the aviation industry, with the quick spread of the virus resulting in governments rapidly restricting travel and closing borders to limit the spread,” notes ACI World director general Angela Gittens. “This has had a drastic and detrimental effect on airports worldwide, and a variety of new measures could become a necessity at airports as the industry restarts.”

ACI has identified key principles to guide the implementation of practical, efficient, and workable health-related and operational measures. ACI believes that measures should be supported by medical evidence, should be risk-based and outcome-driven and that blanket on-airport health screening should be avoided.

In the implementation of measures, the guidance urges, there should be coordination between governments, clear definition of responsibilities and good communication with shippers. As well, it may be necessary to accelerate needed regulatory change.

“Governments and industry regulators will need to ensure that any new processes that they require airports to introduce are adapted to changing data and medical evidence and ensure that they remain aligned with those deployed through other modes of transport and the wider society,” concludes Gittens.

Finally, there is the toll the pandemic has taken on the air cargo labor sector. Boeing President and CEO Dave Calhoun initiated drastic “workforce reductions” in June, noting that a deep cut in the number of commercial jets and services has been a “devastating” consequence of COVID-19.

“We are seeing some green shoots,” however,” he says. “Some airlines are reporting that cargo bookings are outpacing cancellations on their flights for the first time since the pandemic started.”