Airlines call on government to underwrite industry charges

Airlines have called on the government to underwrite hundreds of millions of pounds in regulatory and air traffic control charges as they seek to navigate through the escalating coronavirus crisis.

Sky News has obtained a letter sent on Wednesday by Airlines UK, the industry’s main lobbying group, to Grant Shapps, the transport secretary, in which it calls again for a package of emergency support.

In the letter, Airlines UK urged the government to suspend – rather than defer – air passenger duty payments for six months following the end of the COVID-19 pandemic.

It called for the waiving of air traffic control (ATC) and Civil Aviation Authority (CAA) charges for the whole of 2020, “with payments guaranteed by [the government] so National Air Traffic Services and the CAA can continue to be paid and function as critical enablers of the wider UK aviation landscape, both through the current crisis and then into the recovery phase”.

Airlines UK, whose members include British Airways, easyJet, Ryanair and Virgin Atlantic, also repeated a call for a moratorium on all litigated claims under EC261, the European law which requires airlines to refund passengers for cancelled flights.

“Carriers should also be permitted to issue vouchers instead of refunds and, should refunds be required, carriers should be permitted to defer payment until the crisis period is over and as defined by air traffic volumes, rather than time period,” the group said.

The letter from Airlines UK comes a day after Rishi Sunak, the chancellor, told British carriers that they could expect to engage in discussions with the government about “bespoke” aid “only as a last resort”.

Mr Sunak said airlines would need to exhaust the resources of their existing shareholders and financial stakeholders before the government would consider an injection of debt or equity.

Tim Alderslade, Airlines UK chief executive, said: “A million people work in UK aviation all over the country.

“It is one of the UK’s international assets, as the third largest globally behind only China and the US.

“We welcome that the Government will enter into negotiations with individual airlines, but we also want to work with them on policy actions that could be taken now which could also have a considerable impact.”

Mr Alderslade added that airlines welcomed Mr Sunak’s confirmation that the government would be prepared to enter talks with individual airlines about “bespoke support”.

The latest industry data suggests that aggregate passenger revenues will fall globally by $252bn as a result of the virus outbreak.

Markets with severe travel restrictions now cover 98% of global passenger revenues, Airlines UK said.

Mr Alderslade also urged Mr Shapps to provide more detail about the Coronavirus Job Retention Scheme unveiled by Mr Sunak late last week.

“Please can we urge that further clarity is provided as soon as possible owing to the severe cash pressures that airlines are facing,” he wrote.

Mr Sunak’s comments held open the possibility that the government could take a stake in some British airlines, but underlined the remoteness of such a prospect.

The Treasury is keen for major airline shareholders such as easyJet’s Sir Stelios Haji-Ioannou and Virgin Atlantic’s Sir Richard Branson to inject further sums before they can turn to the government for more support.

Mr Sunak also hinted that the Treasury was close to unveiling a further credit facility for companies which do not have an investment grade credit rating.

“I have listened to feedback that suggests some companies including airlines are uncertain whether they can access this Facility – which is for companies rated as investment grade or equivalent,” he wrote.

“I am in discussions to resolve this uncertainty and further announcements will be made shortly.”

Sky News revealed last week that Rothschild, the investment bank, had been asked to advise ministers on a package of measures, and that one option could include direct taxpayer investments in airline shares.

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United Airlines warns of job cuts without government aid

CHICAGO/WASHINGTON (Reuters) – United Airlines Holdings Inc (UAL.O) warned on Friday it will begin taking steps to reduce its payroll to match a 60% schedule reduction planned for April “if Congress does not act on sufficient government support by the end of March.”

A letter to employees signed by leaders of United and four of its unions said: “While many in Washington, D.C. now realize the gravity of this situation, time is running out.”

The letter was part of a last-minute push by airlines on Friday for a $50 billion government stimulus package to include cash, arguing tens of thousands of jobs will otherwise be lost.

A Republican proposal introduced in the U.S. Senate on Thursday would grant up to $50 billion in secured loans to help passenger airlines hit by the coronavirus crisis, but bars cash grants and could result in the government getting equity stakes.

Senate Majority Leader Mitch McConnell wants a deal signed by the end of the day, spurring intense discussions between airlines and congressional aides, people familiar with the matter said.

American Airlines Group Inc (AAL.O) also joined forces with its main union groups to send a letter to Washington leaders, pleading for help amid what they called an extraordinary erosion in demand for air travel.

“Together, we implore our country’s leadership to act quickly to ensure our livelihoods are protected and our country’s air system remains intact,” American said in the letter signed by Chief Executive Doug Parker and the leaders of seven work groups including pilots and flight attendants.

American has 130,000 employees and is 85% unionized.

American and other large airlines have already raised capital and taken steps to reduce costs to a bare minimum in an effort to preserve cash as bookings continue to decline, but they have warned of furloughs without government relief.

U.S. President Donald Trump has said he stands ready to support the industry, but the idea of a bailout has met with a backlash from some critics who argue the airlines should have saved more cash for a rainy day, rather than rewarding shareholders.

“Whatever they ask for will be very controversial,” said Al Koch, vice chairman of AlixPartners, who was involved in the restructuring of General Motors in 2008-09. “It’s one thing for Trump to say we’ll stand behind airlines, and another thing for Congress to enact something into law.”

Meanwhile, some union groups were lobbying hard for any stimulus package to guarantee protections for frontline employees.

Larry Willis, president of the AFL-CIO’s Transportation Trades Department, said a focus on workers was “one of the main things that was missing from Senator McConnell’s proposal.”

To protect workers, Association of Flight Attendants-CWA President Sara Nelson is pushing for direct payroll subsidies for employees, ranging from wheelchair assistants and gate agents to mechanics and flight attendants.

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Governments offer airlines aid as coronavirus drives deeper flight cuts

SYDNEY (Reuters) – Australia on Wednesday joined a growing list of countries offering financial aid to its ailing aviation sector 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 (BA.N) called on the U.S. government to provide at least $60 billion in access to liquidity, including loan guarantees, for the aerospace manufacturing industry.

U.S. carriers have already asked Washington for $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 (AIR.PA) 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 ($430 million), including A$159 million upfront, as it advised citizens against all travel outside the country.

Sweden and Denmark on Tuesday announced $300 million in loan guarantees for Scandinavian carrier SAS (SAS.ST) 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.

U.S. 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.”

American Airlines Group Inc (AAL.O) said it had extended the time on voluntary unpaid leave options for flight attendants, mechanics and gate agents to up to 12 months, a sign that it does not expect depressed travel demand to rebound any time soon.


The situation in the Asia-Pacific region has worsened for airlines this week as governments have tightened travel restrictions.

Air New Zealand Ltd (AIR.NZ) on Wednesday suspended trading for another two days to further assess the financial implications of drastic capacity cuts announced on Monday.

Australia’s No. 2 carrier, Virgin Australia Holdings Ltd (VAH.AX), 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.

“We have entered an unprecedented time in the global aviation industry, which has required us to take significant action to responsibly manage our business while balancing traveller demands and supporting the wellbeing of Australians,” Virgin Chief Executive Paul Scurrah said in a statement.

Rival Qantas Airways Ltd (QAN.AX) on Tuesday announced plans to cut 90% 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 Ltd (SIAL.SI) 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 CEO Goh Choon Phong said in a statement on Tuesday.

The Philippines’ largest budget carrier, Cebu Air Inc (CEB.PS) 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 [PHL.UL] 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.

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Air freight rates skyrocket amid passenger flight cuts, Chinese factory restarts

LOS ANGELES/SHENZHEN (Reuters) – Air freight rates are skyrocketing after the grounding of many passenger flights in Asia has left shippers scrambling to book limited spots on cargo planes as Chinese industrial production restarts, according to industry insiders.

About half of the air cargo carried worldwide normally flies in the belly of passenger jets rather than in dedicated freighters. But deep flight cuts in response to the coronavirus outbreak have made the market more dependent on freight haulers.

Freight forwarder Agility Logistics said on its website that China’s air cargo capacity was down 39% in February relative to last year because of the passenger flight cuts.

Shippers wishing to rush products out of China by air face sticker shock, said Refael Elbaz, chief executive of Israel-based Unicargo, which specialises in freight forwarding for sellers.

“The price is three times higher – at least – because there is just no capacity,” Elbaz said.

Freight Investor Services said in an update to clients on Monday that cargo pricing on China-to-U.S. routes had reached “abnormal highs” and that intra-Asia traffic was up by 22% over the previous week. TAC Index data shows China-U.S. cargo rates have tripled over the last two weeks to more than $3.50 a kilogram.

The price surge will benefit freight haulers and help cargo-heavy Asian airlines like Cathay Pacific Airways Ltd (0293.HK), Korean Air Lines Co Ltd (003490.KS) and Japan’s ANA Holdings Inc (9202.T) offset some of the steep revenue losses from halting many of their passenger flights.

Chris Mu, who runs a small logistics company in Shenzhen, China, that often uses air transport to supply Amazon (AMZN.O) sellers in Europe and to transport UK-made car parts for assembly in China, said prices had tripled since before the Lunar New Year and are rising by the hour.

“With reduced options, we have to take whatever we can get, flying goods from the UK to the Netherlands, then from Liege in Belgium to Nanchang in Jiangxi province, just to get them to a factory in Shanghai,” Mu said. “For the airlines, it’s fine because they’re still making money, but it’s the middlemen like us who are bearing the costs, and we don’t like to go to our customers every day and tell them the price has gone up.”

DHL’s express volumes have started to recover in China and the company is putting planes back into the network, Deutsche Post AG (DPWGn.DE) finance chief Melanie Kreis said on Tuesday, noting that its fleet is a major asset given the grounding of many passenger planes.

In mainland China, the number of freighter arrivals has increased in recent weeks as factories resumed production. China’s aviation regulator said the number of freighter flights was expected to reach 870 this week, up from 788 in the week starting Feb. 17.

“The number of air charter requests we’ve gotten in the past week are more than the number we’ve received in a normal quarter,” said Brian Bourke, chief growth officer at SEKO Logistics, a Chicago-based freight forwarder.

Most of those requests involved moving goods from China to the United States, he said.

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Coronavirus wipes $70 billion off global listed airlines

LONDON (Reuters) – The rapid spread of coronavirus has wiped almost a third – or $70 billion – off the world’s top 20 listed airlines and reshuffled global rankings, elevating Air China into third place behind U.S. rivals, an analysis by Reuters shows.

The airline sector has been hit hardest by the outbreak of coronavirus, with falling ticket demand and Italy in lockdown forcing carriers to cancel routes and slash costs to survive the mounting crisis.

With the investor sell-off accelerating, United Airlines (UAL.O) has lost its number three position in the global line-up to Air China (601111.SS).

The U.S. carrier’s market capitalization has halved to $11.6 billion, the lowest since 2003, since the start of the year, leaving it also lagging behind Europe’s low-cost carrier Ryanair (RYA.I).

Air China has been relatively unscathed – its market cap was $15 billion on Tuesday, compared with $19 billion on Jan. 2.

The scale of the rout has been breathtaking.

Wizz Air, a budget carrier focused on central European routes, is now more highly valued than Air France-KLM, and the world’s most valuable airline, Delta Air, has seen more than $10 billion knocked off its value this year, taking its market cap to about $28 billion, the lowest since September 2016.

(Graphic: Global airlines by market cap – here)

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