US airlines call for $50bn in emergency support to survive crisis
The US airline industry is calling for $50bn in emergency support as governments around the world step in to help domestic airlines survive a shutdown of international travel amid the widening coronavirus crisis.
Airlines for America, the trade body that represents the largest US passenger airlines, including United, Delta and American, on Monday said it wanted the government to provide $25bn of loans and $25bn of grants to help the industry survive the coronavirus outbreak.
The organisation warned that all seven of its members that carry passengers would run out of money before the end of the year if the crisis continued.
US officials on Monday confirmed the government was considering short-term liquidity support for its airlines, which before the crisis was one of the most financially robust aviation sectors in the world. “We don’t see the airlines failing, but if they get into a cash crunch we’re going to try to help them,” said Larry Kudlow, director of the US National Economic Council.
The US follows France, Italy, Norway, the Netherlands, Russia and others, which have indicated they would provide support measures — ranging from low-cost loans to tax breaks — for their struggling airlines.
The European Commission, which has proposed closing the EU to inbound travel for 30 days, has also said it would develop a framework to allow member states to offer state aid “at unprecedented levels” in an attempt to bolster liquidity during the crisis.
French finance ministry officials said they expected a package to be ready in “the coming days”. There was no immediate plan to increase the French state’s 14 per cent stake in Air France-KLM, but state-backed loans were on the table, officials told the Financial Times.
Italy and France are also expected to revive measures used during the financial crisis in 2008 to support the wages of those temporarily laid off from their jobs, according to one airline in talks with those governments.
Thomas Jarzombek, Germany’s deputy minister, said airlines were eligible for unlimited loans that the government had made available to all German companies affected by coronavirus, and extensive tax holidays it also announced last week.
Russia will allow airlines and travel groups to delay paying taxes, Mikhail Mishustin, prime minister, said.
The British government will hold talks this week with the aviation industry amid calls for a concerted state intervention. The chairman of Virgin Group has urged the government to provide up to £7.5bn of emergency state support to rescue the UK aviation industry.
The moves come as air travel grinds to a virtual halt across the globe, in Europe in particular, forcing airlines to ground most of their fleets and lay off thousands of staff to preserve cash. On Monday more than 14 airlines announced new measures to slash costs with some reducing the number of flights by as much as 90 per cent.
Among those unveiling drastic reductions to their capacity were United Airlines of the US; IAG — parent of British Airways, Aer Lingus and Iberia; Air France-KLM; easyJet; Finnair; Virgin Atlantic; Lufthansa; Air New Zealand; and Aeroflot, among others.
Michael O’Leary, chief executive of Ryanair, Europe’s biggest low-cost carrier, said a total grounding of the entire fleet could not be ruled out.
European airlines are widely considered weaker than their counterparts in the US with a far higher number of carriers operating in a smaller market.
The paralysis in the aviation sector threatens more than the 10m people directly employed globally by the industry. Aviation is estimated to contribute some $2.7tn to the global economy according to Iata, the trade body, with about 4bn passengers carried every year and $6tn in cargo transported, roughly 10 per cent of world trade by value.
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Iata will on Tuesday lead a call for global action to support the industry, which wants governments to help ensure access to finance for cash-strapped airlines. It is also looking for relief from compensation claims, which would require a change in European rules.
Analysts said the crisis was likely to lead to some bankruptcies, as well as a fundamental reshaping of the industry.
Heavily indebted Norwegian Air Shuttle, which is temporarily laying off nearly all its workers and cutting 85 per cent of its flights and is widely regarded as one of the weakest carriers in Europe, has had the yield on its $250m bond maturing in 2021 soar to 51 per cent since the beginning of the month.
Air Baltic’s $200m bond maturing in 2024 dropped to 82 cents on the dollar from 103 cents on the dollar at the start of the month, giving it an implied yield of more than 12 per cent.
Reporting by Peggy Hollinger, Joe Rennison, Jim Pickard and Myles McCormick in London, Claire Bushey in Chicago, Kiran Stacey and Aime Williams in Washington, David Keohane in Paris, Joe Miller in Frankfurt, Richard Milne in Oslo, Sam Jones in Zurich, and Javier Espinosa in Brussels