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Vibrant aviation industry can help restart global economy

Pratap John

Thursday، 26 March 2020 01:56 AM

Restarting the global economy, post Covid-19 crisis, will be a gigantic task, as majority of nations around the world have already locked down, fighting the highly contagious coronavirus.
Whenever that may be – restarting the global economy will be severely constrained in almost all sectors, if we don’t have a viable aviation industry to rely on. 
Aviation provides the only rapid worldwide transportation network, which makes it essential for global business. It generates economic growth, creates jobs, and facilitates international trade and tourism.
Aviation’s global stature as an economic engine is evident in the statistics, points out the International Civil Aviation Organisation.
If the global aviation sector were a country, its total contribution (direct, indirect, induced and catalytic) of $2.7tn to the gross domestic product (GDP), and the 65.5mn jobs it supports, would be comparable to the United Kingdom’s economic size and population.
“Letting this industry fail will have an impact far beyond the livelihoods of the 2.7mn people airlines directly employ and go beyond the 65mn other jobs in the value chain,” says Alexandre de Juniac, IATA director general and CEO.
“If we don’t have a viable aviation industry when we come out of this crisis – whenever that may be – re-starting the global economy will be severely constrained in almost all sectors. And everybody will suffer much longer than necessary,” de Juniac notes. 
In view of the current severe blanket of travel restrictions, the airline industry is in its deepest crisis ever.
A pessimistic scenario drawn by IATA on March 5 had estimated a revenue loss of $113bn for the global air transport industry. 
Sadly, that has changed with coronavirus rapidly spreading, with number of cases exceeding 424,000 and deaths surpassing 19,000 globally. 
If the severe blanket of travel restrictions last for a three-month period, IATA sees a 38% fall in global demand and a $252bn loss of passenger revenue – 44% down on 2019.
Where international passenger traffic is allowed, the air transport industry is mostly repatriating people to their home countries as governments permit. And airlines are also delivering vital goods – medicines and equipment to fight the virus or the most time-sensitive products, feeding global supply chains.
For instance, as of March 24, Qatar Airways operates to more than 150 flights a day, to more than 70 cities globally.
As written in these columns earlier, one segment in the industry that has been severely hit because of the coronavirus crisis is air freight. Severe reduction in passenger flights has meant a huge cut in the cargo capacity that was lifted on passenger flights.
Airlines are reintroducing freighters and doing their best to even adapt passenger aircraft into their cargo operations. That’s because major global supply chains are still running. 
Obviously, air cargo is essential to keeping it that way. Cargo operations are vital and time sensitive. 
The industry led by IATA has been asking governments to provide a lifeline of financial support. A liquidity crisis is coming at full speed. Revenues have fallen off a cliff. And no amount of cost cutting can save the day if no cash is coming in the door. Without financial relief airlines will go bust. And that could happen en masse.
The airline industry seems to have been pitched on to a double whammy situation.  Severe blanket of travel restrictions has meant airlines cannot fly to most countries, including key destinations. None knows for sure how long this ban lasts. 
Worse still, the pandemic has caused a sudden squeeze in demand for air travel. And airlines don’t make money when their planes are grounded.
Clearly, airlines are desperately trying to survive in the most difficult times imaginable. Fortunately, it has the people and the expertise to see this through. 
What it lacks is resources – money that is crucial for survival. 
This is where the governments and central banks, who are custodians of treasuries, can step in. Governments should bridge the industry to the point, where it can start to recover. In the past, the industry has taken off, from a point of recovery – many times during crises. 
Governments around the world have a key role to play in bailing out the industry, which is one of the key engines of global growth. 
There are several levers that only governments have the capacity to pull. These include direct financial support, loans, loan guarantees and support for the corporate bond market by the government or central banks, and tax relief. 
But government intervention and support have to come fast. That’s essential for the industry to stay afloat.


* Pratap John is Business Editor at Gulf Times.

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