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IATA Director General Predicts Government Intervention In Airlines Triggered By The COVID-19 Crisis Will Hold Back Airline Sector Consolidation For Up To Five Years

Published on Mar 23 2021 1:53 PM in General Industry tagged: IATA / International Air Travel Association

IATA Director General Predicts Government Intervention In Airlines Triggered By The COVID-19 Crisis Will Hold Back Airline Sector Consolidation For Up To Five Years

The large-scale government intervention in airlines triggered by the coronavirus crisis will hold back sector consolidation for up to five years, the head of global industry body International Air Travel Association (IATA) has predicted.

IATA's outgoing director general, Alexandre de Juniac, made the comments in an interview with Reuters as the organisation called for a new round of subsidies to weather the COVID-19 pandemic.

"Governments have taken big stakes in many of their national airlines, so it will be difficult for them to sell this asset to any foreign actor and explain that to the taxpayer," De Juniac said. "It will be a factor that will prevent consolidation in the coming three to five years."

Airline tie-ups already faced obstacles before the crisis, including ownership rules linked to bilateral aviation treaties. That has not prevented the emergence of multinationals such as IAG, Lufthansa and Air France-KLM that preserve national carriers within their group structures.

Aid has further raised the hurdles by piling up debts, shielding potential targets and tying would-be buyers' hands. EU rules bar recipients such as Lufthansa and Air France-KLM from making acquisitions until bailouts are repaid.

The IATA head, who will be replaced by International Airlines Group (IAG) veteran Willie Walsh next month, also urged governments that have already provided $225 billion in sector aid to support a travel recovery through new air ticket and route subsidies.

Earlier this month, Australia announced plans to subsidise 800,000 domestic flights as part of a A$1.2 billion ($925 million) travel revival package.

"We've already seen some plans by governments to subsidise tickets, routes and domestic journeys," de Juniac said during a media briefing. "I urge governments to consider stimulus measures."

After a year of partial shutdown, many airlines say that they now need a significant rebound within months to survive - let alone to fund investment in cleaner aircraft and fuel technologies.

Global airlines are discussing more ambitious climate goals than their existing pledge to halve net carbon emissions by 2050, de Juniac said, confirming earlier comments to The Financial Times.

Nonetheless, any wider recourse to public subsidies for air travel is bound to bring some controversy.

"The new normal is going to mean less flying, especially corporate travel, and the industry must adjust," Andrew Murphy of the campaign group Transport & Environment said.

"Public funds should be channelled into developing cleaner fuels and new plane designs, not subsidising what's still the most carbon-intensive form of travel," Murphy said.

IATA began preparing to lobby for route subsidies soon after the pandemic erupted last year, according to internal "key messages" previously reported by Reuters.

Expecting Borders To Have Largely Reopened By October

The organisation now expects borders to have largely reopened by October, when it plans to hold its annual gathering in Boston, four months later than first scheduled.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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