LONDON (Reuters) - Britain’s big airlines said on Monday they would have to ground most of their fleets to survive the coronavirus crisis, with easyJet and Virgin - though not British Airways - appealing for government bailouts to save the industry from collapse.
BA’s parent company IAG said it would cut its flying capacity by at least 75% in April and May. EasyJet (EZJ.L) said it could ground the majority of its fleet on a rolling basis.
Virgin Atlantic said it would park up to 85% of its fleet during April and was asking staff to take up to eight weeks unpaid leave over the next three months to avert job losses.
Shares in British Airways owner IAG plunged 27%, while easyJet tumbled 18%. IAG’s boss, Willie Walsh, announced he was putting off plans to retire. Virgin Atlantic, owned by Richard Branson and U.S. airline Delta, is not listed.
Britain said it was engaging with aviation leaders over support for the industry.
“HMRC (the UK’s treasury) is ready to help all businesses, including airlines, experiencing temporary financial difficulties due to coronavirus,” a spokesman for Prime Minister Boris Johnson said on Monday.
EasyJet called for access to finance to help with liquidity crunches, the suspension of passenger taxes and air traffic charges, and longer relaxation of airport slot rules.
“European aviation faces a precarious future and it is clear that coordinated government backing will be required to ensure the industry survives,” easyJet’s CEO, Johan Lundgren, said in a statement.
Virgin Atlantic asked for the government to provide up to 7.5 billion pounds in emergency credit facilities, which it said would stop credit card processors from withholding customer payments.
IAG, (ICAG.L) which owns Spain’s Iberia and Vueling and Ireland’s Aer Lingus as well as BA, said it had not asked for state aid. Its boss, Walsh, has long opposed government support for airlines.
“I think individual airlines have been approaching governments looking for state aid. We have not done so,” he said, adding that the group would however accept any general facilities provided to all companies which would benefit employees.
(Graphic: Airline's debt, here)
Both easyJet and IAG said they had a strong balance sheet and Citibank research showed that easyJet and IAG would still have much lower net debt to EBITDA ratios than European rivals Air France-KLM (AIRF.PA) and Lufthansa (LHAG.DE) after a simulated three-month shutdown.
IAG said it had total liquidity of 9.3 billion euros, while easyJet said it had 1.6 billion pounds of cash plus an undrawn $500 million revolving credit facility.
Both airlines said they could not provide profit guidance for their current financial years. IAG also detailed cost cuts including a freeze on discretionary spending, working hours reductions and a temporary suspension of employment contracts.
Walsh told investors that 2021 capacity was likely to be lower than currently planned, and that the crisis would accelerate the permanent retirement of dozens of aircraft including BA’s 747s and Iberia’s A340s.
Reporting by Sarah Young, additional reporting by Elizabeth Piper, editing by James Davey, Kate Holton; Editing by Peter Graff