Global aviation industry needs $200b to fight Covid-19

Airlines across the globe will need up to $200 billion in government support to survive the snowballing Covid-19 pandemic challenges, the International Air Transport Association said on Tuesday.

The $150 billion to $200 billion estimate includes indirect support such as loan guarantees and comes after US airlines asked for a $50 billion bailout on Monday.

Iata chief Alexandre de Juniac said governments needed to act decisively to support carriers as many of the companies are running out of cash.

"If we want to maintain a strong airline sector able to cope with this difficult crisis and provide the resources to ensure the recovery will happen in due time, we need governments to act strongly and quickly," he said.

De Juniac's rallying call for the aviation industry came as major world airlines announced further deep cuts to service as the worsening coronavirus crisis ravages demand

Iata chief economist Brian Pearce also said cash was running out for many airlines and that 75 per cent of them had cash to cover less than three months of unavoidable fixed costs.

Passenger numbers were likely to be down significantly more than the 16 per cent decline Iata had previously estimated, Pearce said.

Saj Ahmad, an analyst at London's StrategicAero Research, said the industry has not yet reached the bottom of Covid-19 crisis.

"$200 billion may not be enough to survive the challenge. What about the airports, the retailers within them, the staff, shuttle buses and other related business beyond airlines that need support - how much will they need?" Ahmad said.

"Factor in hotels, leisure firms, caterers and other suppliers, and the final figure suggested by Iata looks like a pittance. The real question is whether governments will fork this money out and risk inflation pressures," he added.

Urging governments to take urgent measures to ensure that air cargo will be available to support the global fight against the pandemic, de Juniac pointed out that over 185,000 passenger flights have been cancelled since the end of January in response to government travel restrictions.

"The world's fleet of freighter aircraft has been mobilised to make up this capacity shortfall. Governments must take urgent measures to ensure that vital supply lines remain open, efficient and effective," said de Juniac.

Battle to survive

Boeing and other US aviation companies are seeking billions of dollars in aid as they battle to survive a plunge in demand caused by the coronavirus pandemic, while Airbus is pausing production at two sites to bolster health and safety measures.

In the US, the trade group Airlines for America (A4A) unveiled a wish list including grants, loans and tax relief, citing an "unprecedented" drop in demand that is "getting worse by the day" and "much worse than 9/11.

"This is a today problem, not a tomorrow problem. It requires urgent action," said A4A President and chief executive Nicholas Calio.

The group said the industry was on track to suffer a drop of $23 billion in liquidity at the end of 2020 under an "optimistic" scenario and a drop of $53 billion under a "pessimistic" scenario.

"We have to back the airlines," US President Donald Trump said at a briefing. "It's not their fault. In fact, they were having a record season."

European carriers announced additional cutbacks in service due to the crisis and also stepped up calls for emergency government aid. Passenger traffic across the region slumped by more than half on average last week, and the situation will worsen as borders closed, trade body Airports Council International Europe said.

International travel to slump

Industry consultancy Tourism Economics forecast international travel will slump at least 10.5 per cent this year, the biggest year-on-year drop.

"The dramatic reduction in global travel demand is already increasing financial pressure on airlines, which Fitch expects will result in increased lease deferrals or restructurings, airline bankruptcies, and ultimately, aircraft repossessions," Fitch Ratings said.

IAG, owner of British Airways and Spanish carrier Iberia, announced it would slash flight capacity by 75 per cent during April and May, while Germany's Lufthansa said it would trim seating capacity on long-haul flights by up to 90 percent, affecting mainly routes to Africa, the Middle East and South America.

Britain's Virgin Atlantic added that it has decided to park 75 percent of its total fleet, and in April this will rise as high as 85 per cent.

British no-frills carrier EasyJet warned it may have to ground "the majority" of its fleet, urging governments across Europe to help their airlines maintain access to liquidity.

Irish budget carrier Ryanair meanwhile did not rule out a full grounding as it unveiled stinging flight cutbacks.

IAG said it was taking measures including cuts to non-essential spending, a freeze on recruitment and reducing work hours.

In London, a spokesman for British Prime Minister Boris Johnson signalled that the government would examine help for affected businesses.

"It's now fair to call this the single biggest shock that global aviation has ever experienced," Qantas Airways Ltd CEO Alan Joyce said in a memo to the airline's 30,000 staff.

Air New Zealand said it would cut capacity to Australia by 80 per cent from March 30 to June 30 as Australian airports are set to lose more than A$500 million in take-off and landing fees.

Avinor, a state-owned Norwegian company, said the number of passengers travelling from the country's airports fell 40 per cent in the week ending March 15.

Japan's ANA Holdings said it would cut 2,630 more international flights serving 58 routes between March 29 and April 24. Philippines' Cebu Pacific said it would cancel all flights from March 19 to April 14 after stringent quarantine orders.

"Critically, while its important to save airlines, its clear that they all cannot be saved. Some will have to be allowed to fail and of course that'll increase job losses along the way. Simply throwing money at this problem will not ease the pain," Ajmad said.

"While some financial support is welcome, it is not the solution for everyone and will not be an infinite resource either," he added.

issacjohn@khaleejtimes.com

Issac John

issacjohn@khaleejtimes.com