IATA sounds the alarm: Incoming government bailout for MENA airlines?
Complex Made Simple

IATA sounds the alarm: Incoming government bailout for MENA airlines?

IATA sounds the alarm: Incoming government bailout for MENA airlines?

Following rapidly plummeting demand in the travel industry, given the ongoing coronavirus pandemic, it was only a matter of time before airlines were to sound a plea for help. Except, it's IATA who's doing it for them.

  • Saudi and Emirati airlines are the most at risk
  • "To minimize the broad damage that these losses would have across the African and Middle East economies, it is vital that governments step up their efforts to aid the industry" - IATA
  • "Every job created in the aviation industry supports another 24 jobs in the wider economy" - Muhammad Al Bakri, IATA’s Regional Vice President for Africa and the Middle East

Following rapidly plummeting demand in the travel industry, given the ongoing coronavirus pandemic, it was only a matter of time before airlines were to sound a plea for help. Except, it's IATA who's doing it for them. 

In a press release published today, the International Air Transport Association (IATA) strengthened its call for urgent action from governments in Africa and the Middle East to provide financial relief to airlines as the latest IATA scenario for potential revenue loss by carriers in Africa and the Middle East reached US$23 billion (US$19 billion in the Middle East and US$4 billion in Africa). This translates into a drop of industry revenues of 32% for Africa and 39% for the Middle East for 2020 as compared to 2019.

Some of the impacts at national level include:

  • Saudi Arabia: 26.7 million fewer passengers resulting in a US$5.61billion revenue loss, risking 217,570 jobs and US$13.6 billion in contribution to Saudi Arabia’s economy.
  • UAE: 23.8 million fewer passengers resulting in a US$5.36 billion revenue loss, risking 287,863 jobs and US$17.7 billion in contribution to the UAE’s economy.
  • Egypt: 9.5 million fewer passengers resulting in a US$1.6 billion revenue loss, risking almost 205,560 jobs and around US$2.4 billion in contribution to the Egyptian economy.
  • Qatar: 3.6 million fewer passengers resulting in a US$1.32 billion revenue loss, risking 53,640 jobs and US$2.1billion in contribution to Qatar’s economy.
  • Jordan: 2.8 million fewer passengers resulting in a US$0.5 billion revenue loss, risking 26,400 jobs and US$0.8 billion in contribution to Jordan’s economy.

Read: Latest research from WTTC shows a 50% increase in jobs at risk in Travel and Tourism

A plan of action

To minimize the broad damage that these losses would have across the African and Middle East economies, it is vital that governments step up their efforts to aid the industry. Many governments in the region have committed to provide relief from the effect of COVID-19. And some have already taken direct action to support aviation including the United Arab Emirates and Qatar. 

But, more help is needed. IATA is calling for a mixture of:

  • direct financial support
  • loans, loan guarantees and support for the corporate bond market
  • tax relief

We are also starting to see several governments in the region providing some financial and tax reliefs, including deferral of aircraft lease payments by the government of Cabo Verde, extension of VAT refund payment dates in Saudi Arabia and positive considerations for financial relief from governments across the region including Jordan, Rwanda, Angola and the UAE. 

“The air transport industry is an economic engine, supporting up to 8.6 million jobs across Africa and the Middle East and $186 billion in GDP. Every job created in the aviation industry supports another 24 jobs in the wider economy. Governments must recognize the vital importance of the air transport industry, and that support is urgently needed. Airlines are fighting for survival in every corner of the world. Travel restrictions and evaporating demand mean that, aside from cargo, there is almost no passenger business. Failure by Governments to act now will make this crisis longer and more painful. Airlines have demonstrated their value in economic and social development in Africa and the Middle East and governments need to prioritize them in rescue packages. Healthy airlines will be essential to jump-start the Middle East and global economies post-crisis,” said Muhammad Al Bakri, IATA’s Regional Vice President for Africa and the Middle East. 

Read: Airlines Facing Rapid Cash Burn

In addition to financial support, IATA called for regulators to support the industry. Key priorities in Africa and the Middle East include:

  • Providing a package of measures to ensure air cargo operations, including fast track procedures to obtain overflight and landing permits, exempting flight crew members from 14-day quarantine, and removing economic impediments (overflight charges, parking fees, and slot restrictions).
  • Providing financial relief on Airport and Air Traffic Control (ATC) Charges and Taxes 
  • Ensuring aeronautical information is published, timely, accurately, and without ambiguity, ensuring the airlines can plan and execute their flights

“Some regulators are taking positive action. We are grateful to the Ghana, Morocco, the UAE, Saudi Arabic and South Africa for agreeing a full-season waiver to the slot use rule. This will enable airlines and airports greater flexibility for this season and greater certainty for summer.  But there is more to do on the regulatory front. Governments need to recognize that we are in a crisis,” said Al Bakri. 

Earlier this week, Dubai’s Crown Prince Sheikh Hamdan bin Mohammed Al Maktoum stated on his Twitter account that "The Government of Dubai is committed to fully supporting Emirates at this critical time & will inject equity into the company."

Sheikh Hamdan also noted that the airline "has great strategic value as one of the main pillars of Dubai's economy, as well as the wider economy of the UAE."

Further details about the equity injection and more measures will be revealed soon. 

Read: flydubai to temporarily suspend operations for 2 weeks in Covid-19 response

After a complete shut down of UAE airlines following a a directive from the National Emergency Crisis and Disaster Management Authority and the General Civil Aviation Authority (GCAA), Emirates said today that it would resume a limited number of passenger flights from April 6 as the UAE relaxes travel restrictions. 

Meanwhile, Saudi Arabian airlines, who according to IATA's aforementioned data are the most at risk regionally, remain grounded. 

Thankfully for airlines in the UAE and Saudi Arabia, both countries have already announced stimulus packages that will likely aid these aviation companies during the global lockdown. 

"Airlines are desperately trying to survive in the most difficult times imaginable," said Alexandre de Juniac, head of the IATA, as reported by Reuters. "We have the people and the experience to see this through. But, to be perfectly frank, we don’t have the money." 

Author
Mark Anthony Karam

Mark Anthony Karam was an Editor at AMEinfo between 2018-2021. You can get in touch with him on LinkedIn here: linkedin.com/in/m-a-karam/

© 2021, ADigitalcom. All rights reserved