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Best Practice for COVID-19 Market Stimulation

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The International Air Transport Association (IATA) called on governments to add market stimulation measures to the support they are giving to keep aviation financially viable. Such measures would encourage travel while systematic testing protocols enable a safe re-opening of borders.

  • 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.
  • More support will be needed in the form of financial stimulus. Many of the support packages are running out, but industry losses continue to mount. Airline losses are now forecast to top $118 billion this year and nearly $39 billion in 2021. The industry is expected to continue burning through cash at a rate of almost $7 billion per month in the first half of 2021.
  • Financial support must come in ways that do not further inflate debt which has risen by 51.4% in the crisis to $651 billion. To put this into perspective, total industry revenue in 2021 is expected to be $459 billion.

IATA identified five proven ways that governments can help stimulate the air travel market while avoiding adding more debt to already highly leveraged airline balance sheets:

  • Temporary waivers or suspensions of government charges, taxes and fees to airlines and passengers will reduce flight costs and lower travel costs for passengers[1]
  • Route subsidies for flights to local/regional destinations to support connectivity for rural communities and business[2]
  • 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 [3]
  • Advance ticket purchases that governments can use for future trips or distribute to the traveling public in the form of vouchers to support travel and tourism.[4]
  • Passenger travel subsidies in the form of vouchers for passengers or as a percentage cash-back on overall travel costs.[5]

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 at serious risk 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 from aviation’s role as an economic catalyst.

View Government Actions for Market Stimulation presentation (pdf) by Hemant Mistry, Director Global Airport Infrastructure and Fuel, IATA

The impact of COVID-19 on the travel industry is unprecedented and unpredictable. The nature of the content that is being shared on the ASATA coronavirus microsite is therefore constantly changing. Please check the date of the post to ascertain its recency.
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