If the global industry reaches these levels of debt, it will be an additional $120 billion in the red compared to the start of the year before the Covid-19 crisis.

The association estimates airlines will be carrying $67 billion in government loans, deferred tax payments and loan guarantees. Another $52 billion will come from commercial loans, capital markets, credit facilities and renegotiated operating leases.

Iata predicts the world’s airlines will be 28% more in debt when services resume later this year.

“Government aid is helping to keep the industry afloat. The next challenge will be preventing airlines from sinking under the burden of debt that the aid is creating,” said Alexandre de Juniac, Iata director general and chief executive.

Globally, governments have committed to $123 billion in financial aid to airlines, of which $67 billion will need to be repaid. Iata said the balance largely consists of wage subsidies ($34.8 billion), equity financing ($11.5 billion), and tax relief/subsidies ($9.7 billion). 

Iata said the aid was “vital” for airlines, which it predicts will burn through an estimated $60 billion of cash in the second quarter of 2020 alone.

“It changes the financial picture of the industry completely. Paying off the debt owed governments and private lenders will mean that the crisis will last a lot longer than the time it takes for passenger demand to recover,” said de Juniac.