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Airline Industry Crisis Deepens As Coronavirus Pain Spreads

Published on Mar 20 2020 11:39 AM in General Industry tagged: Trending Posts / Lufthansa / Qantas Airways

Airline Industry Crisis Deepens As Coronavirus Pain Spreads

The crisis for airlines has deepened as Lufthansa has warned that the industry might not survive without state aid if the coronavirus pandemic lasts a long time, and Qantas Airways has told most of its 30,000 staff to take leave.

The United Nation's International Civil Aviation Organization has called on governments to ensure cargo operations are not disrupted to maintain the availability of critical medicine and equipment such as ventilators and masks that will help fight the virus.

"The spread of the coronavirus has placed the entire global economy and our company as well in an unprecedented state of emergency," Lufthansa CEO Carsten Spohr said in a statement. "At present, no one can foresee the consequences."

His comments echo other industry executives who have called for state support now that passenger operations are collapsing at an unprecedented rate as governments curb travel drastically and demand slumps.

Germany's Lufthansa, which has parked 700 of its 763 aircraft, said that it does not need state support yet as it slashes costs, but painted a bleak picture for the industry and its suppliers.

Spohr said that his company is in talks with planemakers Airbus and Boeing about whether to take delivery of aircraft it has ordered, and on payments.

"We had planned this year to receive a new plane every 10 days - now we don't need any," he told reporters.

He predicted that the industry will emerge into "a different world" after the crisis, saying that the need for airline partnerships will only become more pressing.

Extraordinary Circumstances

Global airlines group International Air Transport Association (IATA) has forecast that the industry will need up to $200 billion of state support, piling pressure on governments facing demands from all quarters and a rapid worsening in public finances as economies slump.

Shares in US airlines fell sharply on Wednesday March 18 after Washington proposed a rescue package of $50 billion in loans, but no grants as the industry had requested, to help address the financial impact from crisis.

The Trump administration's lending proposal would require airlines to maintain a certain amount of service and limit increases in executive pay until the loans are repaid.

Delta Air Lines said on March 18 that it will park more than 600 jets, cut corporate pay by as much as a half and scale back flying by more than 70% until demand begins to recover.

In a memo to staff, American Airlines Group Inc rebuffed criticism that it had rewarded its shareholders with too many dividends and stock buybacks in better times, leaving it with less cash to manage the crisis.

"Unfortunately, this is no ordinary rainy day," said Nate Gatten, American's senior vice president global government affairs. "These are extraordinary circumstances, and additional support is necessary to protect jobs and ensure that the flying public can continue to rely on our industry after the crisis ends."

In Australia, Qantas said that it will cut all international flights and two-thirds of its 30,000 workers will need to take paid or unpaid leave. The Australian government is banning the arrival of non-citizens and non-residents starting Friday March 20.

Government Relief

Several governments have started to act.

Government sources in India told Reuters that the government is planning a rescue package of up to $1.6 billion to aid carriers battered by coronavirus.

India's SpiceJet said on Thursday March 19 that it is suspending the majority of its international operations from March 21 until April 30, while rival IndiGo has asked staff to take a pay cut of up to 20%.

Taiwan's Transport ministry said that it is inviting its airlines to submit capital requirements and financial plans with the view to giving them assistance, such as rolling over loans and providing operating funds.

New Zealand outlined the first tranche of a NZ$600 million ($344 million) aviation relief package, as it announced plans to shut its borders to non-citizens and non-residents.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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