Iata has released analysis showing that the airline industry’s global debt could rise to US$550 bn by year-end. That’s a US$120 bn increase over debt levels at the start of 2020.

“Financial aid is a lifeline to get through the worst of the crisis without folding operations. But during the re-start period later this, the industry’s debt load will be near US$550 billion—a massive 28% increase,” the association said in a statement.

US$67 bn of the new debt is composed of government loans (US$50 bn), deferred taxes (US$5 bn) and loan guarantees (US$12 bn). US$52 bn is from commercial sources, including commercial loans (US$23 bn), capital market debt (US$18 bn), debt from new operating leases (US$5 bn), and accessing existing credit facilities (US$6 bn).

“The next challenge will be preventing airlines from sinking under the burden of debt that [government] aid is creating,” says Alexandre de Juniac, Iata’s director general and CEO.

In total governments have committed to US$123 bn in financial aid to airlines. Of this, US$67 bn will need to be repaid. “It changes the financial picture of the industry completely. Paying off the debt owed to governments and private lenders will mean that the crisis will last a lot longer than the time it takes for passenger demand to recover,” says Alexandre.

“A tough future is ahead of us. Containing COVID-19 and surviving the financial shock is just the first hurdle. Post-pandemic control measures will make operations more costly. Fixed costs will have to be spread over fewer travellers. And investments will be needed to meet our environmental targets.  On top of all that, airlines will need to repay massively increased debts arising from the financial relief. After surviving the crisis, recovering to financial health will be the next challenge for many airlines.”