This week IATA took a look at the cash position of the airlines reporting their second-quarter 2020 financial results (those in the chart represent 42% of global RPKs), to see how long their balances of cash and near cash assets would last if the rate of cash burn they faced in that quarter persisted. The answer, for the median airline, is just over 6 months.
Many airlines, though not in all regions, have survived so far and had their cash balances boosted by
Government aid, which totaled $161 billion worldwide by early September. Of course, airlines have also
slashed costs to reduce cash burn. A smaller number of airlines also raised cash on the capital markets
by issuing debt or equity and selling assets. Consequently, there is a group of airlines who have large
cash balances that would last a long time, even at the 2020Q2 rate of cash burn. However, most airlines
do not have this buffer.
This second quarter measurement is a very stringent test of airline industry financial resilience (see
latest Airlines Financial Monitor). Cash burn was probably at its worst in Q2 as the COVID-19 crisis hit
hardest, but Q4 and Q1 next year are typically quarters of weak cash flows, even without 2nd waves of
the virus. Existing cash balances are also not the only source of liquidity. Airlines can also raise cash
from capital markets and by selling or borrowing against assets. But not all airlines are able to do this.
Even after taking this into account, since Government aid is starting to be withdrawn (e.g. wage
subsidies), many airlines in the industry remain in a fragile financial state and will struggle to survive the
weak winter months, unless we see a faster pace of recovery in air travel than we have today.
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