The aviation industry is experiencing a remarkable resurgence, with passenger numbers rebounding strongly post-pandemic. However, this growth presents significant financial challenges, particularly for mid-market airlines and aviation service providers. At the Amsterdam World Aviation Festival in October 2024, industry leaders highlighted persistent cash flow issues plaguing the sector. From long payment cycles to partially funded customer purchases, these financial hurdles create ripple effects throughout the aviation ecosystem. Enter Numarqe, the innovative corporate credit toolbox designed to help mid-sized to enterprise firms navigate these turbulent financial skies.
Willie Walsh, Director General of IATA, highlights the looming cash crunch for airlines: "If you get an imbalance between the cost ramp-up and revenue build-up, then the cash burn will be quite significant. For undercapitalised, cash-poor airlines, they have to be really cautious as they see evidence of recovery in the industry." Source: Flight Global
In the aviation industry, timing is everything. Yet, cash often moves at a snail's pace. Airlines may take months to pay suppliers, creating a domino effect of delayed payments throughout the supply chain. This leaves maintenance firms, contract workers, and support services in a precarious position, struggling to manage their own expenses while waiting for incoming payments.
A report from Deloitte highlights this issue: "Carriers with declining free cash are less likely to refund card payments for un-flown tickets. To offset this increased risk, card acquirers demand less favourable payment terms or request cash collateral, further reducing airlines' cash flow." Source: Cash Optimisation in the Aviation Industry
Numarqe's solution? A flexible credit line that acts as a financial buffer, allowing businesses to cover immediate expenses without depleting their cash reserves. It's like having an extra fuel tank for your financial journey – ensuring you never run on empty.
The aviation industry is notorious for its extended payment terms. It's not uncommon for invoices to remain unpaid for 60, 90, or even 120 days. This creates a significant working capital gap, particularly for smaller suppliers and service providers who lack the financial runway of larger corporations.
"Payment terms in Europe are about twice as long as the US, because of greater uncertainty due to price wars and exchange rates. Understanding this dynamic can be key to identifying and obtaining payment terms that significantly improve cash flow." Source: Cash Optimisation in the Aviation Industry
Numarqe steps in as your financial co-pilot, offering up to 90 days of interest-free credit. This allows businesses to bridge the gap between outgoing expenses and incoming payments, maintaining smooth operations even when faced with lengthy payment cycles.
Many aviation businesses, especially those in ticketing and booking services, face the challenge of partial customer payments. Customers often make small deposits to secure their bookings, with the remaining balance being paid much closer to the departure date. This delay in full payment results in cash flow imbalances and complicates financial planning.
Numarqe's credit solution acts as a financial stabiliser, providing the liquidity needed to cover operational costs while waiting for full customer payments. It's like having a financial shock absorber, smoothing out the bumps caused by irregular payment schedules.
For multi-modal ticket sellers and other businesses acting as merchants of record, managing collateral requirements across multiple currencies and payment gateways can be a logistical nightmare. To facilitate their customers’ card settlements, resellers are forced to hold permanent cash deposits with their card acquirer, reducing the available cash reserves in their business, and limiting their growth.
Numarqe's multi-currency credit platform enables resellers to meet their regular obligations whilst freeing up their cash flow to support larger collateral requirements as their business grows. It’s like having a credit tap to open when additional funds are needed, ensuring smooth and scalable business operations.
Numarqe isn't just another financial product for CFOs and finance teams; it's a comprehensive solution tailored to the unique challenges of the aviation sector. Even for businesses with healthy cash reserves, Numarqe's credit product offers unparalleled utility, helping manage and allocate credit for all spending and payables in one place.
Numarqe's platform provides real-time visibility into cash flows across multiple currencies, which is crucial for airlines or airline service firms operating in a diverse UK and European market. This allows for more accurate forecasting of cash positions, considering factors like spending versus seasonal demand patterns and exchange rate fluctuations.
Numarqe's multicurrency platform streamlines payments to vendors across the complex aviation supply chain, ensuring efficient supply chain finance management. From cards to invoices, pay suppliers in the way you want to by using credit to optimise working capital and extend your payment terms.
By centralising spending data, Numarqe provides actionable insights enabling data-driven decision-making. This allows for deeper understanding of route profitability analysis, factoring in fuel costs, crew expenses, and airport fees - all payable through Numarqe.
The global Maintenance, Repair, and Overhaul (MRO) market is projected to reach $96.9 billion by 2027, growing at a CAGR of 4.6%. MROs face unique cash flow challenges due to long payment cycles and expensive inventory management. Numarqe helps MROs:
Result: MROs have reduced procurement costs by up to 15% through streamlined processes and better supplier management.
The global airport ground handling market is expected to reach $43.3 billion by 2027. These companies face significant seasonal fluctuations in demand. Numarqe's solutions:
Result: Ground handling companies have reduced labour costs by up to 10% through improved scheduling and resource allocation.
The aviation fuel market is projected to grow from $179.2 billion in 2020 to $238.5 billion by 2025. For these suppliers, managing inventory costs and fuel price fluctuations is crucial. Numarqe's platform:
Result: Fuel suppliers have reduced inventory carrying costs by up to 20% through better cash flow optimisation.
The airline catering market is expected to reach $21.5 billion by 2024, growing at a CAGR of 5.11%. These companies juggle multiple suppliers, locations, and ever-changing passenger demands. Numarqe's solutions:
Result: Catering companies have reduced food waste by up to 30% through improved inventory management.
The aviation IT market is forecast to grow to $35.3 billion by 2025. Tech companies in this sector face unique challenges:
Numarqe helps aviation tech companies:
Result: Aviation tech companies using Numarqe have reported up to 25% improvement in working capital management and a 15% reduction in customer acquisition costs.
By addressing these sector-specific challenges, Numarqe empowers businesses across the aviation ecosystem to optimise their financial operations, reduce costs, and focus on growth. Whether you're maintaining aircraft, handling ground operations, supplying fuel, catering to passengers, or developing cutting-edge aviation technology, Numarqe provides the financial tools and insights needed to soar in today's competitive market.
The aviation industry's long cash flow cycle is a well-documented challenge. According to a recent study by the International Air Transport Association (IATA), the average cash conversion cycle for airlines is around 60 days, significantly longer than many other industries. This extended cycle puts immense pressure on working capital and can lead to financial strain, especially for smaller players in the ecosystem.
Tech firms in the aviation space, such as those providing booking systems or maintenance software, often face even longer payment cycles. These companies may invest heavily in product development upfront, but cash generation can be delayed due to long implementation periods and subscription-based pricing models. It's not uncommon for these firms to wait 90-120 days or more for payment, creating a significant gap between cash outflows and inflows.
Service firms, like aircraft cleaning companies or airport shuttle services, also grapple with extended payment terms. These businesses often have high fixed costs, including labour and equipment, which must be paid regularly. However, they may not receive payment from their airline clients for 60-90 days after services are rendered. This mismatch can create severe cash flow pressures, particularly for smaller service providers.
Numarqe addresses these challenges head-on with its innovative credit solutions:
As the UK and European aviation sector navigates post-pandemic recovery, regulatory changes, and sustainability pressures, effective financial management is more critical than ever. Numarqe's embedded finance platform offers a comprehensive solution tailored to the unique challenges of this market.
By optimising cash flow, streamlining operations, and enhancing financial control, Numarqe empowers businesses to focus on what they do best: delivering exceptional service and ensuring the safety and efficiency of the aviation ecosystem.
Ready to elevate your aviation service business? Embrace the future of financial management with Numarqe. Contact us today to learn how our platform can help your business soar to new financial heights.
Remember, in the world of aviation, cash flow shouldn't be your limiting factor. With Numarqe by your side, the sky's the limit for your business growth and success.
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