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Global Airline Industry May Now Need A $1 Trillion Bailout

This article is more than 3 years old.

The global spread of COVID-19 has had a widespread and devastating impact on the aviation industry. 

The aviation industry supports $2.7 trillion of the world’s GDP. This represents 3.6% of global gross domestic product, and if aviation were a country, it would rank 20th in size by GDP.

With border restrictions coming into force across the world many airlines have canceled the majority of international flights. A total of 43 airlines have grounded their entire fleets and many major carriers have canceled as much as 96% of scheduled flights.

There are ongoing lobbying calls from aviation bodies and airlines themselves that are seeking government bailouts and subsidies to weather the storm.

On March 26 The International Air Transport Association (IATA) strengthened its call for urgent action from European governments to provide financial relief to airlines. IATA has calculated increased potential losses for airlines due to continual groundings and uncertainty, with the scenario for potential revenue loss by European carriers standing at US$76 billion and passenger demand (measured in Revenue Passenger Kilometers) is projected to be 46% below 2019 levels. IATA estimates that a decline of this magnitude puts 5.6 million jobs at risk and $378billion in GDP supported by air transport in Europe alone.

In the U.S., The Airline Passenger Experience Association (APEX) has now called on the government to extend $250 billion of support to airlines to support airlines affected by groundings.

Airlines For America (A4A) already called on the government to provide $50 billion of support for U.S. carriers with an additional $8 billion for cargo airlines. IATA has also requested an additional $150 billion with airline suppliers needing additional funding.

“Our world must immediately respond to protect its global airline industry with a quarter-trillion dollars in retroactively rebated taxes and emergency loans to its airlines and suppliers,” APEX CEO Dr. Joe Leader stated.

With the potential direct and indirect support for carriers and suppliers in the U.S. and EU potentially totalling over $500 billion, the total global bill for support and bailouts could top $1 trillion. IATA had previously estimated that Asia-Pacific carriers could be responsible for nearly half of the losses and negative impact from worldwide groundings. 

In Europe, IATA has in addition to financial support, called for regulators to provide the following relief measures. 

Key priorities in Europe include:

An urgent temporary amendment to the EU261 passenger rights regulation. Short-term flexibility is needed immediately. Permitting the use of vouchers instead of refunds, as has been allowed for some tour operators, would give airlines breathing space to repair cash flows. 

Providing a package of measures to ensure air cargo operations, including fast track procedures to obtain overflight and landing permits, exempting flight crew members from 14-day quarantine, and removing economic impediments (overflight charges, parking fees, and slot restrictions).