Worried by the challenges facing global air travel in the COVID-19 era, airlines have drawn up a market stimulation strategy for governments to adopt to enable the industry to recover.
The airlines, under the aegis of International Air Transport Association (IATA), sought among others, temporary waivers or suspensions of government charges, taxes and fees paid by airlines and passengers to reduce flight costs for passengers.
Others are route subsidies for flights for local/regional destinations to support connectivity for rural communities and businesses as well as financial incentives in the form of rewards for operating flights or seats flown, which can support airlines while load factors or yields are too low.
Also proposed is advance tickets, which the governments can use for future trips or distribute to the traveling public in the form of vouchers to support travel and tourism and passenger travel subsidies or as a percentage cash-back on overall travel costs.
The airlines called on governments to add market stimulation measures to the supports they are giving to keep aviation financially viable.
Since the onset of the COVID-19 pandemic, governments have helped airlines survive the crisis with approximately $173 billion in various forms of financial support.
The Nigerian government, particularly, pledged to support local airlines with N4 billion, which the operators are yet to receive.
IATA said more support would be needed in the form of fiscal stimulus. Many of the support packages are running out while industry losses continue to mount. Airline losses are now forecast to exceed $118 billion this year and nearly $39 billion in 2021. The industry is expected to continue burning out cash at a rate of almost $7 billion per month in the first half of 2021.
Director-General and Chief Executive Officer of IATA, Alexandre de Juniac, advised that financial support must come in ways that do not further inflate debt, which has risen by 51.4 per cent during the crisis to $651 billion.
“To put this into perspective, total industry revenue in 2021 is expected to be $459 billion. Financially-viable airlines will be needed to lead the economic recovery from the depths of the COVID-19 crisis. Government support of $173 billion has helped many survive.
“With the potential to safely re-open borders and revive travel with testing, governments will need to add measures that stimulate demand. Such targeted initiatives will help generate revenues, avoid adding debt to airlines and immediately generate economic activity across the value chain,” de Juniac said.
In normal times, aviation supports more than 87 million jobs and $3.5 trillion in GDP contribution worldwide. But 46 million jobs and $1.8 trillion in economic activity supported by aviation have been put on the line by the dramatic fall in travel demand.
The potential to re-start travel with testing should be a turning point. And it creates the opportunity for government measures to stimulate demand, taking economic advantage of aviation’s role as an economic catalyst.
“A robust economic recovery needs people to start traveling again. Every job in aviation supports a further 29 jobs, demonstrating the broad impact that re-connecting the world will have. There are many good ideas out there. Any government stands to benefit by including proven stimulus measures into their economic recovery plans. When people travel, economies prosper and grow,” de Juniac said.