Governments offer airlines aid as coronavirus forces flight cuts

An aviation group says airlines could need up to $200bn in government support.

The Australian government says it will refund and waive charges to airlines such as domestic air traffic control fees worth $430m [File: David Gray/Reuters]
The Australian government says it will refund and waive charges to airlines such as domestic air traffic control fees worth $430m [File: David Gray/Reuters]

Australia on Wednesday joined a growing list of countries offering financial aid to its ailing aviation sector as global airlines announced deeper capacity cuts due to plummeting demand and stricter border controls associated with the coronavirus.

With airlines halting plane deliveries and new orders to conserve cash, plane maker Boeing Co called on the United States government to provide at least $60bn in access to liquidity, including loan guarantees, for the aerospace manufacturing industry.

US carriers have already asked Washington for $50bn in grants and loans, plus tens of billions in tax relief.

“The long term outlook for the industry is still strong, but until global passenger traffic resumes to normal levels, these measures are needed to manage the pressure on the aviation sector and the economy as a whole,” Boeing said in a statement.

Europe’s Airbus also signalled some government support may be needed if the coronavirus crisis lasts for several months, three people familiar with the matter said.

The Australian government said it would refund and waive charges to airlines such as domestic air traffic control fees worth 715 million Australian dollars ($430m), including 159 million Australian dollars ($96m) upfront, as it advised citizens against all travel outside the country.

Sweden and Denmark on Tuesday announced $300m in loan guarantees for Scandinavian carrier SAS on Tuesday, becoming early movers in an expected rush of pledges to the sector.

The airline industry’s main global body, the International Air Transport Association (IATA), said the total government support needed worldwide could reach $200bn.

“At the risk of being alarmist, the airline industry is on the brink of collapse as governments are quarantining large portions of their populations and closing off borders to foreigners,” Helane Becker, a senior analyst who covers the aviation industry at US investment bank Cowen, told clients.

US President Donald Trump said on Tuesday that travel restrictions within the US are being considered, which would be a further blow to its domestic carriers.

“You can do a national lockdown. Hopefully, we’re not going to need that,” Trump said. “It’s a very big step.”

American Airlines Group Inc said it had extended the time on voluntary unpaid leave options for flight attendants, mechanics and gate agents to up to 12 months, a sign that it does not expect depressed travel demand to rebound any time soon.

Asia Pacific situation worsens

The situation in the Asia-Pacific region has worsened for airlines this week as governments have tightened travel restrictions.

Air New Zealand Ltd on Wednesday suspended trading for another two days to further assess the financial implications of drastic capacity cuts announced on Monday.

Australia’s No 2 carrier, Virgin Australia Holdings Ltd, said it would suspend all international flying from March 30 to June 14 and cut its domestic capacity in half, in a move that could lead to job losses.

“We have entered an unprecedented time in the global aviation industry, which has required us to take significant action to responsibly manage our business while balancing traveller demands and supporting the wellbeing of Australians,” Virgin Chief Executive Paul Scurrah said in a statement.

Rival Qantas Airways Ltd on Tuesday announced plans to cut 90 percent of international capacity and its Singapore-based low-cost airline Jetstar Asia said it would stop flying altogether for three weeks from March 23 to April 15.

Singapore Airlines Ltd plans to halve its capacity through the end of April, with further cuts possible as it braces for a “prolonged” period of difficulty.

“Make no mistake – we expect the pace of this deterioration to accelerate,” Singapore Airlines CEO Goh Choon Phong said in a statement on Tuesday.

The Philippines’s largest budget carrier, Cebu Air Inc, said it was cancelling all domestic and international flights starting from March 19 to April 14 as the country’s main island is placed under enhanced quarantine measures.

Philippine Airlines said it will halt its international flights starting March 20. It started cancelling all domestic flights on Tuesday and said they will resume on April 13.

British budget carrier FlyBe went into administration earlier this month, as the coronavirus added to pressure to its already fragile finances, making it among the first airlines to go out of business since outbreak began in China towards the end of 2019.

Source : Reuters

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