Governments offer airlines billions in aid as coronavirus decimates travel

Planes parked at the Capital International Airport, in Beijing, China, on March 17, 2020.
Planes parked at the Capital International Airport, in Beijing, China, on March 17, 2020.PHOTO: EPA-EFE

SYDNEY (REUTERS) - Australia and Taiwan on Wednesday (March 18) 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 from the coronavirus pandemic.

With airlines halting plane deliveries and new orders to conserve cash, Boeing called on the US government to provide at least US$60 billion (S$85.7 billion) in access to liquidity, including loan guarantees, for the aerospace manufacturing industry.

US carriers have already asked Washington for US$50 billion 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 A$715 million (S$612 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 US$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 US$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.

US President Donald 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," 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 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 said international passenger volumes on Monday were 44 per cent lower than a year ago.

Australia's No 2 carrier, Virgin Australia Holdings, 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.

"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 23 to April 15.

Singapore Airlines (SIA) 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," SIA CEO Goh Choon Phong said in a statement on Tuesday.

 

The Philippines' largest budget carrier, Cebu Air said it was canceling 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 canceling all domestic flights on Tuesday and said they will resume on April 13.