Iata: ‘Widespread use’ of vouchers will accelerate cash burn

Iata: ‘Widespread use’ of vouchers will accelerate cash burn

The International Air Transport Association (Iata) has highlighted how the extensive use of refund vouchers will accelerate cash burn for airlines.

The association warned that the “widespread use” of vouchers in Europe is “one of the difficulties airlines will be facing as they are slowly moving towards restarting their operations”.

With the grounding of fleets in mid-March, as the pandemic crisis began to hit revenues, airlines opted to provide vouchers to passengers rather than immediate refunds.

“This proved useful in slowing down their cash burn and helped prevent bankruptcies,” reported Iata Economics in its latest Chart of the Week.

“However, airlines’ liability to transport these passengers was only deferred but did not disappear.

“A month after the easing of travel restrictions on intra-EU routes, we can already observe that passengers have used a large number of vouchers to pay for their travel.

“This means that airlines now incur the cost of transporting these passengers – against no or limited new revenues.

“Whilst the issuance of vouchers helped decelerate cash burn a few weeks ago, their use will now accelerate cash burn in the coming months.”

Iata also said the booking behaviour of passengers has changed “dramatically”, with 41% of global travellers booking up to three days before travel in June, compared to 18% last year.

“This makes it difficult for airlines to plan and optimise their schedules, crew and fleet,” said the association.

In April, Alexandre de Juniac, Iata’s director-general and chief executive, said airlines owed $35 billion for cancelled flights, so the use of refund vouchers would buy the industry “vital time to breathe”.

Last week, the Iata Economics chart showed how intra-Europe routes were leading the initial recovery in international flights after border restrictions were eased.

Most passengers were travelling to visit friends and family or going on holiday, rather than going on business trips.