March 17, 2020 / 4:51 PM / 12 days ago

Coronavirus-stricken airlines call for state aid to avert ruin

LONDON/PARIS (Reuters) - Airlines demanded urgent tax relief to avoid multiple bankruptcies as coronavirus disruption continued its spread across the global industry on Tuesday.

As EU transport ministers prepared to discuss financial support, the Airlines for Europe group called for widespread tax deferrals “to ensure that as many airlines as possible survive” the crisis.

The call came as the aviation industry’s main global body, IATA, said the total government support needed worldwide could reach $200 billion. U.S. carriers have already asked Washington for $50 billion in grants and loans, plus tens of billions in tax relief.

Major airlines have made drastic and unprecedented schedule cuts, bringing operations to a near halt, as demand dries up and the fight against the virus brings draconian travel restrictions, soon to include the closure of EU borders.

The appeals from industry leaders became more strident as more airlines grounded planes on Tuesday.

Sweden and Denmark announced $300 million in loan guarantees for Scandinavian carrier SAS (SAS.ST), becoming early movers in an expected rush of pledges to the sector.

Job losses are adding to pressure on governments to act.

IAG-owned (ICAG.L) British Airways told unions it planned to make an unspecified number of pilots redundant.

“We are extremely disappointed that a company like BA, with a strong balance sheet and cash reserves, has rushed into redundancy consultation,” said Brian Sutton, head of pilots’ union BALPA.

“This is the biggest crisis the aviation industry has faced in decades,” Sutton added. “Without more government support we fear the impact will be far greater.”

Air travelers grab carry-on luggage behind rows of empty seats aboard a Delta flight, as coronavirus disease (COVID-19) disruption continues across the global industry, from New York's JFK International Airport to San Francisco, California, U.S., March 17, 2020. REUTERS/Shannon Stapleton

The British government is discussing a support package for airlines and airports, finance minister Rishi Sunak said later on Tuesday.

APPEAL FOR BILLIONS

In a letter to U.S. political leaders, United Airlines’ (UAL.O) management and unions pleaded for urgent financial support to “allow United to continue paying our employees as we weather this crisis, protecting tens of thousands of people”.

Boeing (BA.N) will get government aid, President Donald Trump said - as European rival Airbus (AIR.PA) ordered production halts in France and Spain, where lockdowns are affecting workers and suppliers.

European Union transport ministers will hold a video-conference on Wednesday, an EU official said. Besides Britain, France, Germany and the Netherlands have expressed readiness to extend financial support to airlines.

Lufthansa is expected to receive a government cash injection, one German banker told Reuters. Sweden’s support for SAS was part of a larger loan-guarantee package for airlines worth 5 billion crowns ($500 million).

Brussels Airlines, a Lufthansa (LHAG.DE) subsidiary, on Tuesday said that it was suspending all flights for four weeks. Singapore Airlines (SIAL.SI) also cut more capacity, Emirates suspended dozens of destinations and Canada’s WestJet halted international services.

‘VERY FRAGILE PLACE’

The Philippines’ Cebu Air (CEB.PS) canceled all flights from March 19, and Jetstar Asia announced a three-week shutdown after parent Qantas (QAN.AX) cut its own capacity by 90%.

The global airline industry will need “something like $150 billion to $200 billion” from governments including loan guarantees, IATA head Alexandre de Juniac told reporters.

Slideshow (4 Images)

The coronavirus is now affecting countries accounting for 94% of passenger revenue, according to Brian Pearce, Geneva-based IATA’s chief economist.

Three-quarters of airlines now have liquidity covering less than three months of unavoidable fixed costs, Pearce said. “The majority are in a very fragile place.”

Reporting by Sarah Young in London and Laurence Frost in Paris; Editing by Pravin Char

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