Airline industry turmoil deepens as coronavirus pain spreads

Airline industry turmoil deepened on Thursday as Qantas Airways Ltd told most of its 30,000 employees to take leave and India prepared a rescue package of up to US$1.6 billion to aid carriers battered by coronavirus, government sources said.

The UN’s International Civil Aviation Organization called on governments to ensure cargo operations were not disrupted to maintain the availability of critical medicine and equipment such as ventilators, masks, and other health and hygiene items that will help reduce the spread of the coronavirus pandemic.

Passenger operations have collapsed at an unprecedented rate as the virus spreads around the world, with Delta Air Lines Inc parking more than 600 jets, cutting corporate pay by as much as 50%, and scaling back its flying by more than 70% until demand begins to recover.

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

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

American Airlines Group Inc in a memo to staff 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 it would cut all international flights after the Australian government warned against overseas travel and two-thirds of its 30,000 workers would need to take paid or unpaid leave.

“The sad fact is that due to circumstances beyond our control, travel demand has evaporated,” Qantas Chief Executive Alan Joyce said in a memo to staff seen by Reuters. “We have no work for most of our people.”

Senior Qantas executives and the board will take a 100% pay cut until at least the end of the financial year ending June 30, up from 30% earlier, joining the chairman and CEO in taking no pay, the airline said.

In China, the epicentre of the outbreak, its biggest state-backed carriers reported a 80% plunge in passengers carried in February and said they would further optimise capacity and step up cost-cutting.

As countries step up border restrictions, more flights are being cut. Air Canada said it was gradually suspending the majority of its international and US transborder flights by March 31.

India is poised to join a growing list of countries offering aid to its aviation industry. The Finance Ministry is considering a proposal worth up to US$1.6 billion that includes temporary suspension of most taxes levied on the sector, according to two government sources who have direct knowledge of the matter.

New Zealand on Thursday outlined the first tranche of a NZ$600 million (US$344 million) aviation relief package, including financial support for airlines to pay government passenger charges and cover air traffic control fees.

The New Zealand government on Thursday advised citizens not to travel overseas because of the risks posed by the coronavirus.

Air New Zealand Ltd said it would close its cabin crew base in London earlier than initially planned, leading to the loss of 130 jobs.

Budget carrier easyJet PLC and its UK pilot union signed an agreement to minimise the risk of pilot layoffs in Britain over the next 18 months, including a pay freeze and asking all crew to take unpaid leave from March 23 to June 22, according to a memo seen by Reuters.

- Reuters