March 19, 2020 britthammond

Governments scramble to prop up airlines as virus forces more flight, job cuts

Business

Australia and Taiwan joined governments offering financial aid to airlines, while authorities in Europe rushed on Wednesday to agree steps to rescue carriers which have had to park planes and cut jobs as the coronavirus puts the brake on travel.

The scramble to bail out carriers came as Italy once again rescued Alitalia, with Rome taking control of the airline and shelving a sale process for the perennially loss-making carrier.

European Union transport ministers discussed potential help following calls from the airline sector for urgent tax relief to avoid multiple bankruptcies.

Norway’s government held talks with Norwegian Air (NWC.OL) executives after the struggling airline called for financial backing similar to that given to regional counterpart SAS (SAS.ST) by Denmark and Sweden.

In the United States, airlines have asked Washington for $50 billion in grants and loans, plus tens of billions in tax relief. Sector executives are due to speak with U.S. President Donald Trump by phone on Wednesday.

Planemaker Boeing Co (BA.N) has called on the U.S. government to provide at least $60 billion in access to liquidity, including loan guarantees, for the aerospace manufacturing industry as airlines halt deliveries and new orders to conserve cash.

Airbus (AIR.PA) has also signaled 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 A$715 million ($430 million), including A$159 million up front, as it advised citizens against all foreign travel.

Taiwan’s civil aviation regulator said that its airlines could apply for subsidies and loans backdated to Jan. 15.

CASH CRUNCH

The outbreak of the flu-like virus has wiped 41%, or $157 billion, off the share value of the world’s 116 listed airlines, with many using up their cash so fast they can now cover less than two months of expenses.

The International Air Transport Association (IATA) representing the sector said $200 billion in government support could be needed worldwide.

Airlines have been forced to take drastic measures to cut their costs.

Emirates and El Al Israel Airlines ELAL.AT asked staff to take unpaid leave, and Vietnam Airlines HVN.HM and Vietjet Air VJC.HM will suspend flights to major Southeast Asian and European destinations.

U.S. airlines are seeking to quickly reduce their workforces through unpaid leave of up to 12 months with medical benefits or early retirement packages in a sign carriers do not expect a quick rebound.

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

PASSENGER NUMBERS PLUNGE

Global passenger numbers are expected to fall by as much as 30% this year with a full recovery not likely until 2022 or 2023, S&P Global Ratings said.

“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,” Cowen analyst Helane Becker told clients.

The situation has worsened for airlines this week as governments have tightened travel restrictions.

United Airlines Holdings Inc (UAL.O) said it would cut 60% of its capacity in April, including 85% of its international flights.

Air New Zealand Ltd (AIR.NZ) on Wednesday suspended trading in its shares for another two days to assess the financial implications of deep capacity cuts announced on Monday.

“This is going to be quite tough as we forecast the volumes that we are looking at over the next few months,” CEO Greg Foran said in a video sent to reporters.