Via Financial Times

The chairman of Virgin Group will urge the government to provide up to £7.5bn of emergency state support to rescue the UK aviation industry, which has been decimated by the coronavirus pandemic.

Peter Norris plans to send a letter early this week to the prime minister, chancellor and transport secretary warning them that the entire aviation sector — airlines and airport operators — faces pressing financing issues, according to an industry source.

The letter will warn that even large airlines could run dangerously low on cash because of the plummeting demand and travel bans, which has seen carriers around the world cancel tens of thousands of flights, withdraw earnings guidance and implement austerity measures.

Virgin, which is a majority shareholder of UK carrier Virgin Atlantic, will urge the government to extend the temporary suspension of airport slot rules to October. The European Commission on Friday said it would relax these rules until June, but many in the airline industry want to see it extended for a longer period.

The letter, which was first reported by Sky News, comes after the crisis affecting the airline industry deepened last week following President Donald Trump’s move to block most travel by Europeans to the US in an attempt to curtail the spread of the virus. The travel ban was subsequently extended on Saturday to also include UK and Ireland from midnight Monday night eastern standard time.

The move will have a devastating impact on Virgin Atlantic, British Airways and Norwegian Air Shuttle who fly the profitable transatlantic routes. Ryanair and easyJet are also being hit by plummeting demand and travel bans in Europe.

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There is a growing concern that the pandemic could paralyse travel until May/June and hit the start of the summer season when the airline industry typically makes the majority of its money. Even before the US travel ban, Iata, the airline trade body, warned that the industry was in crisis because of the global spread of the coronavirus, which it estimated could cost airlines as much as $113bn in revenues this year.

On Friday, the chief executives of several major airlines gave a series of dire warnings about the outlook for the sector as they scrambled to shore up their businesses following a sharp rise in cancellations.

The chief executive of British Airways warned staff that the carrier will have to cut jobs, suspend routes and ground aircraft because of the coronavirus pandemic. Alex Cruz told 45,000 staff in the message entitled “The Survival of British Airways” that BA was “under immense pressure” despite a robust balance sheet and the support of a strong parent company in IAG.

While Delta’s chief executive Ed Bastian told employees the Atlanta-based airline was in discussions with the US government for help and taking moves to preserve cash, revealing that cancellations were outnumbering bookings for flights in the next four weeks.

Meanwhile, the French government is preparing to come to the aid of Air-France KLM, which has been hit hard by the coronavirus and Donald Trump’s travel ban. France is studying how best to support the carrier, which is 14.3 per cent state-owned, with senior finance ministry officials saying they were considering loans rather than increasing their shareholding.

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