The liquidity of the airlines based in eye sight

Les liquidités des compagnies aériennes fondent à vue d’oeil

Photo: John Moore Agence France-Presse
The airlines are hit by the pandemic, which force the repayment of US$35 billion in cancelled reservations.

With nearly half of their expenses in fixed costs and a fleet almost at a standstill, the liquidity of the airlines based in eye sight. A hollow in the working capital fund is expected in the second quarter, with expenditures in excess of $60 billion US magnified by 35 billion of reservations to repay.

In its previous projections, the international air transport Association (IATA, in English) evoked a decrease of 38 % of the demand resulting in a loss of 252 billion of industry revenue passengers in 2020. In its last report as of march 31, the Association, which represents 290 airlines claiming 82 % of the world traffic, draws a portrait rather black the state of health of the cash of the carriers, which is expected to reach its peak in the second quarter.

During this three-month period ending June 30, the net losses of the industry are expected to be $ 39 billion, against a net profit of 7 billion in the second quarter of 2019, sealed by a drop in estimated 68 % of the revenues between the two quarters, $ 210 billion to a measly 67 billion. There registry a refund of $ 35 billion tickets sold, but not used due to cancellations massive due to travel restrictions imposed by governments.

A matter of time

“The outputs of treasuries will be heavy. We assess that airlines could have to spend 61 billion of liquidity in the second quarter. The airlines can’t cut fast enough to escape the impact of the crisis “, writes the IATA. Question to add to the magnitude of the weight of this constraint from the working capital fund, the IATA has already pointed out that a company type was available in the beginning of the year cash covering the equivalent of two months of operations.

The scenario adopted by the IATA borrows from the forecasts of the consulting firm Oxford Economics predicting that the fall in economic activity will reach its trough at the end of the second quarter and then bounce back, according to a V model and return to its level of 2019, somewhere towards the end of 2020. For air transport, we focus on a restriction of strict trips over three months. But the impact will be firmly felt, the pursuit of the cargo activity at a rate reduced not bringing income at the margin.

 

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The airports are facing heavy losses in 2020

The carriers are slashing variable costs, which are falling dramatically. A decline of some 70 % of these costs is expected in the second quarter, in response to the decrease of 65 % of the planned capacity. The fixed costs and semi-variable, which represent nearly half of spending by carriers, could for their part be reduced by one-third. As for the effect-benefit of the plunge in the price of kerosene, it is mitigated by the restrictions on the activities and operations of hedging against fluctuations in fuel prices. “The airlines cut where they can, while trying to maintain their workforce and their customers in view of the recovery of the future,” says IATA.

Layoffs at Air Canada

Air Canada has given an illustration on Monday by announcing that approximately 16 500 unionized employees and managers will be laid off this week, for a minimum period of two months. The carrier employed 37 000 people at the end of 2019. In the second quarter of last year, Air Canada generated revenues of about $ 4.7 billion. This year, the air carrier has no idea what awaits him, wrote on Monday the first vice-president, employees, culture and communications of the company, Arielle Meloul-Wechsler, in an internal note obtained by The canadian Press, stating that the flight program had been reduced from ” 85% to 90% “.

The director general of the IATA, Alexandre de Juniac, welcomes the understanding of certain governments. “Several governments have responded to the need of using the industry. Among the countries that offer financial assistance programs or regulatory in particular, we note the British, the United States, Singapore, Australia, China, New Zealand and Norway. More recently, Canada, Colombia, and the netherlands have relaxed their regulations to allow airlines to offer passengers travel vouchers rather than rebates […]. Travel and tourism are virtually halted due to extraordinary circumstances and unprecedented. The airlines need working capital to get through this period of extreme volatility in […]. This provides a buffer period vital that will allow the industry to continue to work, ” he says.

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