Created on 14.04.2020 14:53

The aviation sector is perhaps the most affected by the ongoing crisis, with countries on lockdown and airlines across the globe suspending operations. Airline stocks have fallen 60% since the crisis began. The trade association for the sector is now requesting financial support to continue to remain solvent.

At a G20 video conference last week—chaired by Saudi Arabia’s King Salman and attended by the heads of state of the 20 most industrialized nations on the planet—a commitment was made to inject $5 trillion into the global economy amid forecasts of a global recession. The money will be given using targeted fiscal policy, economic measures, and guarantee schemes.

For the aviation sector to survive, the G20 and other governments are being asked to provide direct financial support, loans or loan guarantees and tax relief, as part of a comprehensive rescue package for the industry. These programs could provide both immediate and medium to long-term assistance to the airline industry and its employees.

Airlines have substantial expenses that are fixed and cannot be reduced, and many have now been paying out more in refunds than they have received in new bookings. As a result, the average two-month cash reserves held by airlines are rapidly being exhausted. The estimated cash shortfall globally is approximately $200 billion.

In an open letter to G20 leaders, Alexandre de Juniac, the Director General and CEO of the International Air Transport Association (IATA), has requested that they make funds available to the airline industry.

“Governments have the tools to prevent the loss of essential air transport connectivity by urgently providing, or facilitating the provision of, financial support,” says de Juniac in the letter. “Aviation has not only made globalization possible, it has successfully lifted more than 1 billion people from poverty since 1990 and it continues such efforts by contributing to 15 of the 17 UN Sustainable Development Goals. Without the global connectivity provided by aviation, the post-pandemic economic recovery and progress towards securing the well-being of our global community will be seriously impeded.”

Airlines contribute to 35% of international trade globally, with each airline job creating 24 more in the wider economy. Approximately 57% of international tourists travel by air.

Emergency and critical goods are transported using airlines, especially in times of crisis, where a delay in delivery could be the difference between life and death. If the airline industry collapses, the impact on trade, travel and tourism will likely cause significant damage to global economies. Australia, Brazil and China have already announced financial packages for the sector in their countries.

Most large airlines in the Middle East are government-owned and funded, but the region is also home to several private airline operators, who are critical to the airline industry. Airlines in the Middle East carry more than 157 million passengers every year.

· In the U.A.E., Dubai Airport is a major hub between the east and the west, serving 88 million passengers a year across 270 destinations. The airline industry contributes 12.1% to the economy of Dubai.

· In Saudi Arabia smaller airlines play a critical role in transporting pilgrims from across the globe especially from lower income nations in Africa and Asia. A disruption in pilgrimage will have an impact on the Saudi economy.

· In Egypt, travel and tourism contributes 15% to GDP. The sector provides jobs for four million Egyptians. It is also a key contributor of foreign exchange to the country. Being among the world’s oldest civilizations, the country is must-visit destination for many travelers.