Published on Wednesday, May 27, 2020

Airline debt could swell to more than half a trillion dollars in 2020

Airlines could run up debts of US$550 billion by the end of the year, IATA is warning.

Governments and commercial lenders have injected about $123 billion into struggling airlines since the start of the Covid-19 pandemic, it said.

The latest to receive a government bailout was Lufthansa, which got a $9 billion state-backed cash injection this week. 

State aid for airlines worldwide includes $34.8 billion in wage subsidies, $11.5 billion in equity financing and $9.7 billion in tax relief and subsidies.

These liabilities will hamper airlines' ability to quickly get back to profitability after the pandemic, IATA said.

"The next challenge will be preventing airlines from sinking under the burden of debt that the aid is creating," said Alexandre de Juniac, IATA's director general and CEO, adding that IATA is 'fearful that we are going to see a number of failures'.

Combined global airline debt could increase by 28%, he warned.

IATA shows the majority of state financial support has been in the US and Europe, but South America could be vulnerable to airline failures.

It follows the filing for bankruptcy protection of Colombia's Avianca and LATAM this month.

"Airlines particularly in Latin America need strong government support," added de Juniac.

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