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Europe's airline industry caught off guard by Covid-19

According to the International Air Transport Association (IATA), more than 185,000 passenger flights have been cancelled since the end of January, after the first cases of Coronavirus were discovered and travel restrictions began in Asia (initially with China) and then in the rest of the world. An entire sector is in trouble, calling on intergovernmental bodies and regulators for help to ensure the survival of an industry that supports millions of jobs in Europe and throughout the world.

The trade association pointed out that "the scale of the current crisis in the industry is far worse and more widespread than 9/11, SARS or the global financial crisis", in the face of uncommon restrictive measures.

"Stopping the spread of COVID-19 is the top priority of governments," said IATA chief Alexandre de Juniac in a statement. "But they must be aware that the public health emergency has now become a catastrophe for economies and for aviation"

The association also points out that the massive withdrawal of many airlines has led to a drop of up to 90% in traffic for some markets compared to last year. Overall, IATA estimates the losses generated by the Coronavirus crisis on the European airline sector at 76 billion USD in turnover and a 46% drop in demand, measured in turnover per passenger kilometre.

Moreover, as Alexandre de Juniac reminds us, "millions of jobs are at stake", alongside the airlines, which would "need urgent government action if they are to emerge from this situation in good health to help the world recover, once COVID-19 has been defeated".

But the first impacts on the industry are already being felt. Airports are starting to close terminals, such as Orly Airport, which has closed Terminals 1, 2 and 4 since March 26. For others, it is even the entire airport that is temporarily closed, as is the case for Biarritz airport, Lille-Lesquin or Cyprus airport. Across the continent, 12.2 million jobs are at risk and $823 billion less in terms of Europe's GDP.

In order to assess the extent of the damage and predict the funds required to save the sector, IATA estimated the impact that the crisis would have, country by country in Europe.

In France, the shortfall would be 65 million fewer passengers in 2020, leading to an estimated $12 billion in lost turnover, potentially jeopardising 318,000 jobs and a $28.5 billion contribution to the French economy. Reflecting these estimates, the Air France-KLM group recently announced a "very significant" reduction in the number of flights over the next two months, following a wave of repatriation currently underway to ensure the return of French nationals to the country. A drop in traffic is estimated at between 70 and 90%, in response to the fall in demand and the restrictions imposed by various states around the world.

In Italy, the European country most affected by the crisis at the moment, it would mean 7 million fewer passengers, leading to a loss of turnover of 9.5 billion USD, the potential loss of 256,000 jobs and a contribution of 17.4 billion USD to the Italian economy.

The second country that could be most economically impacted, 113.5 million fewer passengers could be registered in the UK this year, cutting $21.7 billion from the sector's turnover, putting at risk nearly 402,000 jobs and a contribution of about 32.7 billion USD to the UK economy.

Spain's shortfall would be the largest in Europe. As the world's second-largest destination with nearly 84 million tourists, the state could record a 93.7 million drop in passenger numbers in 2020. These losses would have a colossal impact estimated at 13 billion USD, 750,000 jobs and a contribution of 49.4 billion USD to the national economy, the highest contribution of all European countries.

Also, there could be 84.4 million fewer passengers in Germany.The airline industry across the Rhine would lose 15 billion USD in turnover, threatening 400,000 jobs and a contribution of 28 billion USD to the country's economy.  As a reminder, the national airline and Europe's largest airline by volume, Lufthansa, is currently going through the biggest financial crisis in its history, so much so that it has been forced to ground nearly 700 aircraft in its fleet, after having reduced its operations by 95% to a traffic level equivalent to that of 1955.

Finally, air traffic in Greece could lose 21.5 million passengers and 3.2 billion USD in turnover. In all, 193,000 jobs are at risk and the Greek economy could lose 8.3 billion USD.

For all these reasons, IATA is calling for emergency assistance of up to 200 billion USD to save the world's airlines from collapse due to the global downturn in air traffic. At the European level, in addition to direct financial support, the association is also calling for loans, loan guarantees and support for the corporate bond market, as well as corporate tax relief.

As a reminder, the CAPA - Center for Aviation, estimates that most of the world's airlines will be bankrupt by the end of May 2020, if governments do not provide immediate support.

But according to IATA, the first steps taken by the European Council have already been taken, which the association welcomes:

Some regulators are taking positive action. We are grateful to the European Council for insisting on a full-season waiver to the slot use rule. This will enable airlines and airports greater flexibility for this season and greater certainty for next summer. But there is more to do on the regulatory front. Amendments are urgently needed to give more flexibility for EU 261. And they must take measures to keep air cargo moving,” said Rafael Schvartzman, IATA’s Regional Vice President for Europe.

Various operators in the sector and two defence associations, namely the European Regions Airline Association (ERA) and Airlines for Europe (A4E), have also joined forces through an open letter sent to the European Minister of Transport. The joint letter calls for complementary and more flexible measures to be put in place to ensure the survival of companies by the end of the crisis, in particular permission to issue credits rather than refunds, a solution which is not currently authorised by the European Commission.

As for French airlines, the industry believes that demand will go back to a "normal" level in July.

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