Debt wall threatens airlines after stoppage of air traffic

Debt wall threatens airlines after stoppage of air traffic

The airlines resorted to major State assistance and loans with the planes on the ground to prevent sinking. But because air traffic recovery is reported late, they could fall below the debt’s weight. According to the International Air Transport Association ( IATA), which forecasts a decline of more than half in revenues this year, global traffic “bottomed out” at the peak of the coronavirus epidemic in April, with a 94 percent drop from last year.Of a total of $ 123 billion in state aid, they will have to repay $ 67 billion and the total amount of the sector’s debt will amount to “almost $ 550 billion, or a massive 28% increase,” according to IATA.

Air France obtained 7,000 million euros (7,900 million dollars) in loans, Lufthansa 9,000 million euros (10,170 million dollars) of which 3,000 million in loans, the American companies 50,000 million dollars in aid, of them 25,000 million in loans .Some have already sunk, such as the two largest airlines in Latin America, LATAM and Avianca, but also Virgin Australia, South African Airways or Thai Airways. “Where governments have been slow to react or have done so with limited funds,” according to IATA CEO Alexandre de Juniac.

Today we have a liquidity crisis, which is mainly managed with state loans, with subsidies. But this liquidity crisis will quickly turn into a debt crisis and there will probably be companies that will not be able to recover”, predicts Bertrand Mouly-Aigrot, expert in air transport from the Archery Strategy Consulting cabinet, asked by AFP.