Rishi Sunak promises special measures for coronavirus-hit airlines

Joint letter to PM says hundreds of thousands of jobs are at risk because of Covid-19

The chancellor has promised special measures to help the aviation industry to weather the coronavirus crisis, after major airports said they would have to close down operations if they didn’t get support and airlines warned of imminent bankruptcies.

Rishi Sunak said he was discussing a specific package of help for airports and airlines with the transport secretary, Grant Shapps, as part of the £330bn made available to keep the economy afloat during the crisis.

Virgin Atlantic, which on Sunday called for up to £7.5bn for UK airlines, said it welcomed the “unprecedented level of support” for a sector which was “facing the biggest crisis in its history”.

EasyJet’s chief executive Johan Lundgren said the announcement was “very welcome”, adding: “Airlines are facing significant pressure and without government action there is a real risk to the industry.”

Unions and airports urged that the details of the package be released and measures implemented swiftly.

The UK-based Airport Operators Association (AOA), which had warned that some airports hubs could go out of business within weeks, earlier called for the immediate suspension of taxes and business rates as well as the provision of emergency financing, as passenger traffic through airports has plummeted.

Heathrow, Gatwick and Manchester airports had also signed a joint letter to the prime minister warning that they may “have to close passenger facilities and halt operations” and that hundreds of thousands of jobs were “instantly at real risk”. Heathrow, Britain’s biggest airport, employs 70,000 people directly.

The call came as the International Air Transport Association (Iata) said that only about 30 of more than 700 airlines operating commercial flights around the world were likely to survive the next few months without help.

European members of the Airports Council International (ACI) wrote to ministers to request a continent-wide response to the crisis, noting that EU, UK and EEA airports have had 100 million fewer passengers than expected in 2020.

In Italy, where measures to combat the outbreak were initiated within Europe, passenger traffic was down by 90%, ACI said. Across the continent, numbers were 54% lower last week (9-15 March), after a 24% drop the previous week, with the situation rapidly deteriorating.

The AOA chief executive, Karen Dee, said: “Governments across the world are supporting their national aviation industries, as many parts of the global travel industry have come to a halt. We are clear that airports will shut down in weeks unless urgent action is taken to support the industry.”

Dee said airports were taking immediate and drastic action to cut costs but the government would need to provide additional support through financing, guarantees, grants and tax relief.

London Gatwick, the UK’s second largest airport, announced on Tuesday it would cut 200 temporary jobs, end night flights and cut executive pay, as part of a package of measures to protect the business. Gatwick’s chief executive, Stewart Wingate, warned that “other serious measures are likely”.

Wingate said: “Gatwick is a resilient business, but the world has changed dramatically in recent weeks and we have been forced to take rapid, decisive action to ensure that the airport is in a strong position to recover from a significant fall in passenger numbers.”

After the US banned visitors from the UK and travel restrictions were put in place in Europe and beyond, Gatwick had just 238 flights scheduled to depart on Tuesday, about a third of its peak capacity.

On Monday, MAG, the owner of Manchester, London Stansted and East Midlands airports, said it would be taking measures including reduced working hours, temporary pay cuts and temporary layoffs. Its chief executive, Charlie Cornish, said the government needed to help the industry to “make sure it is still there and ready to help the economy recover once this is all over”.

ACI Europe said Europe’s airports had lost €2bn (£1.8bn) in revenue for the first quarter, even before factoring in the Schengen entry ban, and losses would deepen in the coming months.

It said some had closed terminals and would shut down all operations, “bracing for a near total collapse of their traffic, connectivity and revenues”.

With many big airlines preparing to ground most of their fleets, Iata warned that most carriers were in danger of bankruptcy.

Its chief economist, Brian Pearce, said: “The top 30 airlines have reduced their debts – but the vast majority still have high levels of debt, which means there are fixed obligations even in the absence of revenues.

“Some 75% of airlines we looked at had less than three months of cash to pay fixed costs … the median had two months of cash at start of year.”

Those reserves were largely spent, Pearce indicated, and travel restrictions were expected to last at least until the end of May.

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A separate report from the Centre for Aviation says most airlines could go bankrupt by May. Iata’s director general, Alexandre de Juniac, said that “it was logical” to infer that conclusion.

De Juniac said a large amount of cargo capacity in the belly of passenger planes would also be lost – space typically used for high-value goods as well as fruit and vegetables. Grounding flights would also mean “less critical availability for medical equipment, medical staff or technical people to fight the virus”.

He urged “strong and swift” action from governments, adding: “We realise airlines are not the only sector impacted … But if we want this crisis to come to an end fast and quickly from an economic standpoint, the need for a strong airline sector to provide the resources to transport business people, goods and tourists is absolutely critical.”

Less than two weeks ago Iata said in its worst-case scenario, airlines would lose $113bn (£93bn) in revenues in 2020. Pearce said: “We’re already there and beyond … they are clearly worse than this.”

At the start of the year, Iata had forecast an aggregate $29.3bn global profit for airlines this year. Asked to update, Pearce said: “At the moment we’re concerned that large parts of the industry might not be there.”

Contributor

Gwyn Topham Transport correspondent

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