The International Air Transport Association (IATA) has published new analysis showing that airlines may burn through $61 billion of their cash reserves during the second quarter ending 30th June 2020, while posting a quarterly net loss of $39 billion. The analysis is based on the impact assessment released by IATA, under a scenario in which severe travel restrictions last for three months. In this scenario, full-year demand will fall by 38 per cent and full-year passenger revenues drop by $252 billion compared to 2019. The fall in demand would be the deepest in the second quarter, with a 71 per cent drop.
Revenues are expected to fall by 68 per cent. This is less than the expected 71 per cent fall in demand due to the continuation of cargo operations, albeit at reduced levels of activity. Variable costs are expected to drop sharply—by some 70 per cent in the second quarter—largely in line with the reduction of an expected 65 per cent cut in second-quarter capacity. The price of jet fuel has also fallen sharply, although we estimate that fuel hedging will limit the benefit to a 31 per cent decline. These changes to revenues and costs result in an estimated net loss of $39 billion in the second quarter.