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Governments called upon to act to save aviation industry

‘Most of world’s airlines’ face bankruptcy by May as flights are culled due to tightening travel restrictions to contain coronavirus outbreak

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Help: the global aviation industry has issued urgent calls for governments around the world to act - most airlines face bankruptcy by May. Credit: Getty Images

WORLDWIDE - Global aviation has shrunk overnight due to efforts to contain the coronavirus outbreak that could see most international airlines facing bankruptcy by end of May. Many airlines are desperately asking for government bailouts within the upcoming weeks.

Aviation consultancy CAPA Centre for Aviation called urgently for "coordinated government and industry action" for airlines around the world to avoid "catastrophe" in a report published on Monday (16 February).

"Cash reserves are running down quickly as fleets are grounded, and what flights there are operate much less than half full," it added.

The world's three largest aviation alliances, oneworld, SkyTeam and Star Alliance, jointly urged governments to "evaluate all possible means" to assist the industry. Together, they represent more than 58 of the world's top carriers.

Last week, global aviation body IATA urged governments to "respond quickly to the financial frailty of airlines" and "prepare for the broad economic consequences of these actions" to contain the spread of the coronavirus.

"Governments must also recognise that airlines-employing some 2.7 million people-are under extreme financial and operational pressures. They need support," said Mr Alexandre de Juniac, IATA's director general and CEO.

US carriers have formally issued a plea for a bailout of some US$50 billion, AFP reported. Citing an "unprecedented" drop in demand that is "getting worse by the day" and "much worse than 9/11," the trade group Airlines for America (A4A) unveiled a wish list including grants, loans and tax relief.

Most of the world's largest airlines have announced drastic reductions to flight schedules, leaving hundreds of planes grounded. Employees have been asked to take voluntary unpaid leave while senior executives take pay cuts.

Hong Kong-based Cathay Pacific faces a significant unaudited loss of more than HK$2 billion (US$0.26 billion) from its full-service segment, Cathay Pacific and Cathay Dragon, based on February alone.

Cathay Pacific Group's chief customer and commercial officer, Mr Ronald Lam, said the airline has reduced passenger capacity by 65% for March.

"Given the expected further drop in travel demand, we are planning to only operate a bare skeleton passenger flight schedule for April, which represents up to 90% capacity reduction," he said, adding that the same arrangement could continue into May should travel restrictions remain.

Meanwhile, Singapore Airlines (SIA) has cancelled more flights to China and Italy, with more Europe flights to be axed as Singapore announces new travel restrictions. It had already cut thousands of flights to countries such as India, Japan, South Korea, Indonesia and Thailand.

The reduction in flights to date amounts to a 15.6% drop in capacity across both SIA and SilkAir. The SIA Group, which includes budget arm Scoot, has seen a 18.7% cut in capacity compared to its original schedule from February to end-May.

Troubled national carrier Malaysia Airlines is facing a "critical situation" as demand plummets and flight cancellations pour in.

In an internal email to the airline's 13,000 staff yesterday, Malaysia Aviation Group (MAG) group CFO, Mr Boo Hui Yee said the group's immediate priority is "to stem losses, save cash and sustain the business against the highly 'changeable' uncertainty of the COVID-19 pandemic".

"Drastic actions have been taken to ensure sustainability of cashflow for the business and this includes capacity management, deterring non-critical spend, seeking vendors' concessions, freezing of discretionary spend and cost cutting in many areas," said Mr Boo.

To date, Malaysia Airlines has cancelled more than 2,000 flights up to April due to travel restrictions imposed by countries within its network.

United Airlines CEO Mr Oscar Munoz and president Mr Scott Kirby in a letter to employees on Sunday said they were cutting total capacity by about 50% for April and May and expect those cuts to extend into the summer travel period.

Qantas announced cuts to domestic and international flying schedules, slashing its international capacity by 90% and domestic capacity by 60%, both "until at least the end of May".

Australian's Tourism Minister Simon Birmingham said that airlines "had enough cash reserves to remain viable for now, but did not rule out a bailout to stop Qantas and other carriers going under".

Air New Zealand said on Monday it will cut its long-haul capacity by 85% and impose redundancies as it shrinks to a skeleton operation. It is suspending flights from Auckland to destinations including Chicago, San Francisco, Buenos Aires, Vancouver, Tokyo, Honolulu and Taipei.