Airlines warn of more bankruptcies as wage support ends

Reuters

Posted at Oct 07 2020 02:55 AM

American Airlines 737 max passenger planes are parked on the tarmac at Tulsa International Airport in Tulsa, Oklahoma, US March 23, 2020. Nick Oxford, Reuters/File

PARIS - Global airlines warned on Tuesday that the coronavirus-stricken industry was on course to burn through another $77 billion in cash in the second half of 2020, calling on governments to renew expiring wage support programs.

"The issue now is that aid, particularly the wage subsidies, is starting to be withdrawn," Brian Pearce, chief economist at the International Air Transport Association (IATA), told reporters.

Airlines consumed $51 billion in cash in the second quarter as the pandemic brought global travel to a near-standstill, the industry body said.

The call for increased support came as US airlines begin furloughs of more than 32,000 workers amid fading hopes for a new federal bailout package. Wage support programs are also tapering off in Europe and elsewhere.

In the Philippines, carrier Philippine Airlines also announced it may retrench up to 35 percent of its more than 7,000 workers because of the collapse of the demand for air travel due to the COVID-19 pandemic. 

Whereas the withdrawal of subsidies makes sense for sectors in recovery, IATA warned of further airline bankruptcies in the northern hemisphere winter as the collapse in revenue continues to dwarf cost savings. The average carrier now has cash for 8.5 months of operations, Pearce said.

"We're facing some tough winter months for airlines when cash flows are always seasonally weak," he said. "We're looking (at) airlines getting into trouble if not failing without either further government support or (being) able to access capital markets for more cash."

Airlines are pushing for a global system of pre-flight COVID-19 tests to replace quarantines and travel restrictions they blame for worsening the travel collapse.--With a report from ABS-CBN News