Governments offer airlines aid as coronavirus drives deeper flight cuts

Australia and Taiwan join countries offering financial aid to ailing aviation sectors

A Qantas Airways aircraft is docked at Sydney Airport in Sydney, Australia. Qantas is cutting almost all overseas flights and more than half its domestic schedule as the coronavirus outbreak paralyses travel worldwide. Photograph: Brendon Thorne/Bloomberg

A Qantas Airways aircraft is docked at Sydney Airport in Sydney, Australia. Qantas is cutting almost all overseas flights and more than half its domestic schedule as the coronavirus outbreak paralyses travel worldwide. Photograph: Brendon Thorne/Bloomberg

 

Australia and Taiwan joined a growing list of countries offering financial aid to their ailing aviation sectors 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, Boeing Co called on the US government to provide at least $60 billion in access to liquidity, including loan guarantees, for the aerospace manufacturing industry.

US carriers have already asked Washington for $50 billion in grants and loans, plus tens of billions in tax relief. Airline executives are due to speak with US President Donald Trump by phone on Wednesday morning.

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 outbreak of the flu-like virus has wiped 41 per cent, 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, a Reuters analysis showed.

The Australian government said it would refund and waive charges to airlines such as domestic air traffic control fees worth A$715 million (€386 million), including A$159 million upfront, as it advised citizens against all travel outside the country.

Taiwan’s civil aviation regulator said late on Tuesday that its airlines could apply for subsidies and loans to help mitigate the cost of virus prevention measures, backdated to Jan. 15. The carriers can also apply for loans to help with normal operations, the regulator added, without specifying how much money was available.

Sweden and Denmark on Tuesday announced $300 million 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 $200 billion.

“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,” Cowen analyst Helane Becker told clients.

Mr Trump said on Tuesday that travel restrictions within the United States 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,” Mr Trump said. “It’s a very big step.”

US airlines are seeking to quickly reduce their workforces through early retirement packages or unpaid leave of up to 12 months with medical benefits in a further sign that airlines do not expect a quick rebound and must cut costs.

S&P Global Ratings said global passenger numbers were expected to decline by up to 30 per cent this year and a full recovery was not likely until 2022 or 2023.

Flight cuts get deeper

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

United Airlines Holdings Inc said it would cut 60 per cent of its capacity in April, including 85 per cent of its international flights.

Air New Zealand on Wednesday suspended trading for another two days to further assess the financial implications of drastic 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,” Air New Zealand chief executive Greg Foran said in a video sent to reporters.

Up to 30 per cent of the airline’s 12,500 staff will not be required, he said, adding that the carrier would offer leave without pay and voluntary redundancies before moving to job cuts.

Auckland International Airport Ltd said international passenger volumes on Monday were 44 per cent lower than a year ago.

Australia’s number two carrier, Virgin Australia Holdings Ltd , said it would suspend all international flying from March 30th to June 14th and cut its domestic capacity in half, in a move that could lead to job losses.

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

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 chief executive Goh Choon Phong said in a statement on Tuesday. – Reuters