Latin America’s stricken airlines facing long haul to recovery

IATA estimates it will take at least 3 years for the region’s airlines to inch back to their pre-pandemic level for domestic and regional flights

MEXICO CITY • Latin America’s beleaguered airlines will take up to three years to recover losses due to the coronavirus pandemic, and in the meantime, desperately need government help, according to experts surveying the damage to the industry.

The International Air Transport Association (IATA) estimates it will take at least that time for the region’s airlines to inch back to their pre-pandemic level for domestic and regional flights.

Long-haul services to the US and Europe will take until 2024 to come back, it said.

“It’s a long-range view; it will not be short term. It will take a lot of work,” said Peter Cerda, IATA VP for the Americas.

Evidence of the severity of the crisis came last week when the region’s two largest airlines, Chilean-Brazilian LATAM Airlines Group SA and Colombia’s Avianca SA, filed for bankruptcy in the US.

With countries across the region in lockdown, flight activity has plummeted 93% from around 200,000 a day, with losses in revenue estimated at US$18 billion (RM78 billion).

Cerda said that figure is likely to increase.

The IATA official said the impact to the industry is even worse than the aftermath of the Sept 11, 2001, attacks on the US.

“We are going to have airlines that are not going to be able to recover, that will have to shut down their operations for good,” he said.

After almost three months of lockdowns and restrictions on movement across the region, airlines have run out of cash and government support is “urgent”, he said.

“What we are asking for is not a financial rescue. It’s support, immediate relief that allows the industry to sustain operations,” said Cerda.

Airlines are seeking tax relief and credit guarantees from governments.

Globally, government aid to the airline sector stands at US$123 billion, including US$300 million from Latin America, according to IATA.

Governments are conscious of the broader effects and Chile is considering a bailout for LATAM, seeing the airline as vital to the economy, and seeking to preserve 10,000 direct jobs, as well as the livelihood of up to 200,000 people the government said are dependent on the airline indirectly.

The company has already cut 1,800 of its total 42,000 staff.

The company is also holding discussions with the governments of Brazil, Peru and Colombia to save jobs there.

In Brazil, the largest internal market in the region with 90 million passengers a year, private banks headed by a development bank have granted a US$1.1 billion loan to its three largest airlines — Gol Linhas Aéreas Inteligentes SA, Azul Brazilian Airlines SA and LATAM.

Gol and Azul first had to agree to cut executive salaries and provide special rates and packages to stimulate recovery.

In Mexico, the region’s largest destination for foreign tourists, Tourism Minister Miguel Torruco insisted his country would continue to have “strong, solid airlines”.

IATA said talks are underway with the government to reduce airline charges.

The country’s largest, Aeromexico SA, will resume some routes starting today, though ratings agency S&P Global Ratings lowered its credit rating this week due to the possibility of its debt being “unsustainable”.

In Argentina, state-owned Aerolineas Argentinas announced a merger with its subsidiary Austral Cielos del Sur SA this month to reduce infrastructure and staff to save up to US$100 million. — AFP