A recent analysis by the International Air Transport Association (IATA) has revealed that debt accumulated by the global aviation industry could increase by 28 percent this year, reaching $550 billion.
This marks a $120 million increase in debt since the beginning of this year. Out of the new debt, around $67 million comes from government loans, $5 billion from deferred loans.
The analysis by IATA further revealed that $52 billion is from commercial sources including commercial loans ($23 billion), capital market debt ($18 billion), debt from new operating leases ($5 billion), and accessing existing credit facilities ($6 billion).
Alexandre de Juniac, IATA’s Director General and chief executive officer told the media, “Government aid is helping to keep the industry afloat. The next challenge will be preventing airlines from sinking under the burden of debt that the aid is creating.”
“Over half the relief provided by governments creates new liabilities. Less than 10 percent will add to airline equity. It changes the financial picture of the industry completely. Paying off the debt owed governments and private lenders will mean that the crisis will last a lot longer than the time it takes for passenger demand to recover.”
The association further added that additional financial support is still required to help the airline survive the coronavirus pandemic, which has hit the aviation sector the hardest.
According to IATA, the global aviation sector could lose around $314 billion in revenue this year due to the coronavirus pandemic, which originated in the Chinese city of Wuhan last year.