Airlines Plead for State Relief After Virus Shreds Travel

Airlines in the U.S. and Europe cut flights, idled planes and drafted plans to eliminate jobs, while seeking government support to weather the roughest downturn in the industry’s history, caused by the spread of the coronavirus.

American Airlines Group Inc.,Delta Air Lines Inc.,United Airlines Holdings Inc. andSouthwest Airlines Co. said they’re discussing potential aid from the government, without providing details.

The governments of Germany and France are weighing financial aid to help getDeutsche Lufthansa AG andAir France-KLM through the crisis. The head ofNorwegian Air Shuttle ASA acknowledged that the discount carrier is at the brink and pleaded for government aid. The Italian government is considering pumping 300 million euros ($333 million) into strugglingAlitalia SpA and may take over the airline, people familiar with the matter told Bloomberg.

The economic effects of the viral outbreak have slammed the airline industry as people scrap travel and countries place restrictions on flights from nations with the highest levels of infection. President Donald Trump’s decision to setcurbs on European flights capped a tumultuous week and is expected to upend a trans-Atlantic market that’s usually the world’s most lucrative.

On Saturday, Trump added bans on the U.K. and Ireland to the initial list of continental European countries facing temporary restrictions. The existing travel curbs on Europe affect about 7,300 flights to the U.S., or more than 2 million one-way passenger tickets over the one-month period, according to Cirium, which tracks traffic. Adding in the U.K. and Ireland adds about 4,300 more flights to the total.

“It is a crisis of global proportions like no other we have known,”British Airways chief Alex Cruz said in an internal memo on Friday and seen by Bloomberg. It’s worse than the SARS outbreak in the early 2000s, 9/11 in 2001 and the financial meltdown of 2008-2009, he said.

Jobs will be lost as the airline idles planes, cuts back on flights and moves to protect it balance sheet, Cruz said. The airline, owned byIAG SA, has held talks with multiple banks on its urgent financing need, the Financial Timesreported.

The virus first swept through Asia, decimating air traffic and leading to a Chinese government decision to take charge of the parent of Hainan Airlines. Now the epicenter of the pandemic has moved to Europe, with countries locking down travel and confirmed cases topping 140,000 across the globe. Measures taken by states could cost the tourism industry50 million jobs, according to the World Travel & Tourism Council.

In the U.S., where Trump declared a state of emergency on Friday, the situation has quickly turned grim for airlines.

White House officials are discussing temporarilyallowing cash-strapped carriers to keep some taxes and fees they collect from passengers, people familiar with the matter told Bloomberg News.

Germany’s Lufthansa is expected to seek a loan from the state-run Kreditanstalt fuer Wiederaufbau bank to weather the fallout, while as a last resort the government could alsopurchase a stake, according to a person familiar with the plan. The airline is also considering a temporary halt to most of its business and suspending its dividend. In astatement, the carrier acknowledged it’s seeking additional funds and will use aircraft financing to help with the effort. The company, with bases in Germany, Austria, Switzerland and Belgium, owns about 86% of its fleet.

“We have decided to talk to the governments of our home countries not just about reducing the burden on us, but also about active support as soon as that becomes necessary,” Lufthansa Chief Executive Officer Carsten Spohr told staff in a video message on Friday.

In France, where the state owns 14% of Air France-KLM, a finance ministry spokesman said the government will use all tools available to help companies in which it has a stake, including recapitalization. The government of the Netherlands owns almost 13 percent of the carrier.

The airline said it’s building up cash reserves and preparing an emergency plan to cut costs. A spokeswoman for Air France-KLM declined to comment on possible government funding.

Jacob Schram, who leads Norwegian Air, said measures presented by the government in Oslo Friday were positive, but that more targeted support will be required, including an injection of liquidity. The carrier plans to park 40% of its long-haul fleet through May while laying off half of the workforce.

‘Secure Our Future’

The crisis facing the industry is growing worse because nations are taking increasingly severe measures to combat the spread of the virus. Italy,. Europe’s most infectred country, has implemented a national lockdown and Spain is following suit. Norway on Saturdayclosed its airports, and ports, following similar moves by Denmark.

France will shut all schools starting Monday, while President Emmanuel Macron has proposed that European Union leaders discuss stricter border controls.

“We need to act quickly and together at the European level,” Macron wrote on Twitter.

Air France-KLM CEO Ben Smith, addressing employees in a video, said the survival of the company — in which the Dutch state also holds a stake — is on the line.

“Right now we need to secure our future,” Smith said, asking to defer payments of aeronautical taxes and fees as well as some social charges.

Air France-KLM hasdrawn down 1.1 billion euros ($1.2 billion) from a revolving credit facility, bringing available liquidity to 5.5 billion euros, a move it said is aimed at preserving financial flexibility. The company will get government help if needed, Finance Minister Bruno Le Maire said in an interview on RMC.

— With assistance by Ania Nussbaum, Birgit Jennen, Alan Levin, Saleha Mohsin, Melissa Cheok, and Blaise Robinson

Source: Read Full Article