Required stimulus package estimated at US$ 200bn
The International Air Transport Association (IATA) is appealing to governments in Africa and the Middle East, as part of a worldwide campaign, to provide emergency support to airlines as they fight for survival due to the evaporation of air travel demand as a result of the COVID-19 crisis.
“Governments must be aware that the public health emergency has now become a catastrophe for economies and for aviation. Many routes have been suspended in Africa and Middle East and airlines have seen demand fall by as much as 60% on remaining ones. Millions of jobs are at stake,” said Alexandre de Juniac, IATA’s Director General and CEO in a recent press statement.
Extensive cost cutting measures are being implemented by the region’s carriers to mitigate the financial impact of COVID-19. However, due to flight bans as well as international and regional travel restrictions, airlines’ revenues are plummeting—outstripping the scope of even the most drastic cost containment measures.
With average cash reserves of approximately two months in the region, airlines are facing a liquidity and existential crisis. Support measures are urgently needed. On a global basis, IATA estimates that emergency aid of up to US$ 200bn is required.
IATA is proposing a number of options for governments to consider, the communiqué continued. These include:
- Direct financial support to passenger and cargo carriers to compensate for reduced revenues and liquidity attributable to travel restrictions imposed as a result of COVID-19;
- Loans, loan guarantees and support for the corporate bond market by governments or central banks. The corporate bond market is a vital source of finance, but the eligibility of corporate bonds for central bank support needs to be extended and guaranteed by governments to provide access for a wider range of companies.
- Tax relief: Rebates on payroll taxes paid to date in 2020 and/or an extension of payment terms for the rest of 2020, along with a temporary waiver of ticket taxes and other Government-imposed levies.
“The much needed stimulus will enable global supply chains to continue functioning and provide the connectivity that tourism and trade will depend on if they are to contribute to rapid post-pandemic economic growth,“ remarked Muhammad Al Bakri, IATA Regional Vice President Africa, Middle East.
Africa’s air transport industry’s economic contribution is estimated at US$ 55.8bn supporting 6.2mn jobs and contributing 2.6% to GDP. In the Middle East air transport’s economic contribution is estimated at US$ 130 billion supporting 2.4mn jobs and contributing 4.4% to the GDP.
