The International Air Transport Association (IATA) has cautioned airlines that to keep their operations afloat, there is the need to align their operating costs in line with their revenues.
Alexander de Juniac, chief executive officer (CEO) of the global airlines’ regulator, said without working on that formula there will be disruptions in air transport value chain.
Speaking in an online interview, Juniac said careful management of costs will likely not see costs fall in proportion to reductions in flying.
De Juniac said: “Doing that is a difficult balancing act because airlines must also preserve the capability to be able to safely and efficiently ramp up operations when demand picks up.
“This is particularly challenging when you consider licensed personnel with long training periods. And that uptick in demand looks like it will take much longer than anybody could have anticipated. This crisis is not a few months of downturn. We are looking at much more than a year of severely depressed demand.
“The decisions taken in the next weeks and months to manage through the crisis will reset aviation’s trajectory for several years to come.
‘’Careful management of costs will likely not see costs fall in proportion to reductions in flying.”
He said even with severe fleet reductions, price reductions from lessors will remain limited and the larger proportion of short-haul flying will force fleet unit costs upwards.
He said: “Although fuel costs have fallen with the reduction in flying, there is an expectation of higher fuel prices in 2021.
“In the same way, although infrastructure costs have fallen in line with the drop in demand, our infrastructure partners will need to find solutions—including government relief—to fill budget gaps without increasing costs to airlines.
‘’Labour is another major cost item. We are seeing significant job loss announcements as airlines try to adjust the size of the workforce. To maintain last year’s level of labour productivity , employment would need to be cut 40 per cent. Further jobs losses or pay cuts would be required to bring unit labour costs down to the lowest point of recent years, a reduction of 52 per cent from 2020 Q3 levels
“Today’s analysis is yet another reminder of the need for our two most fundamental requests of governments in this crisis:
Continued financial relief, in forms that do not increase the debt burden. ‘Using systematic pre-departure testing to safely re-open borders without quarantine measures.
“Although the news is bleak, I’d also like to remind everyone that the crisis has not killed the dedication of aviation to continuous improvements.”
Meanwhile, IATA has signed an agreement with the World Meteorological Organisation aimed at expanding the number of airlines providing weather data during flight operations.
This agreement, according to Juniac, will help make up for the gap created by the sharp reduction in flying.
Juniac said: ” This data collection supports better weather forecasting which has many uses, including safe flight operations.”
