Coronavirus outbreak: Can the Airline Industry regain the vigour?

Travel bans have been imposed by almost every country to stop the spread of infectious disease, COVID-19. The resultant effect has been a significant financial loss to the aviation sector worldwide. Saving lives is the priority for any government right now, and they are left with no other choice but to restrict the movement of people from one place to another.

The coronavirus pandemic has massively hit the travel, tourism, and aviation industries across the globe. As per the WTTC (World Travel and Tourism Council), up to 50 million jobs are at risk in the Tourism and Travel industry due to the pandemic crisis.

GOOD READ: How Travel and Aviation Sector is Tackling Coronavirus Crisis?

Government to provide relief package to the Aviation industry

In Australia, planes have been grounded with barely a couple of flights each day. The aviation industry has got into a challenging situation where layoffs seem inevitable. Virgin Australia stopped all the international flights effective from 30 March to 14 June and reduced its domestic flights for the same period. It will result in the grounding of the 53 aircraft by the airline.

However, the government of Australia came to the industries rescue last month by announcing a $715 million relief package for the airline industry. The Federal government is not charging any fees for aviation fuel excise, regional and domestic aviation security charges and air services charges. The cash aid will be backdated to 01 February. The financial support is expected to cover the reimbursement of $159 million.

Virgin and Qantas eye multi-million-dollar deal with government

Both the airlines are working towards a contract with the government to support the domestic flights. Virgin cited restructuring alternatives and its discussion with the government regarding financial assistance.

The airlines' credit rating is downgraded, it has stood down 8,000 workers, and apart from one domestic route, all others are suspended. The aviation company is going through hard times, and the fear is, it might soon go into voluntary administration.

However, the Australian Prime Minister Scott Morrison has made it clear that the package for the airlines is for the entire sector and not limited to any specific company. The government is ready to provide financial support for domestic routes and will inject $100 million of cash flow for supporting small airlines.

As per the Australian Council of Trade Unions, the government's initial package is not fit as fuel excise relief is not relevant if planes are grounded. The union says that the government must protect the airline industry from completely collapsing due to the coronavirus crisis. So far, the government is committed to providing aid worth $1 billion to the aviation sector.

Precautionary measures for Australians returning from abroad

The government is actively taking measures for Australians who are returning from abroad. When the citizens enter the country, they need to stay in a hotel for 14 days and will get $90 per day to spend on room service. After completion of the 14-day period, they can go to their respective homes. However, the limited number of domestic flights have been a big hurdle.

Federal government to subsidize domestic flights

To address the challenge of citizens returning from abroad stranded at the airports, Deputy Prime Minister Michael McCormack got in talks with Qantas and Virgin airlines to start some domestic routes during the lockdown period. The government is interested in transferring people to their homes, and it requires local services from one capital city to another.

However, airlines which already facing a hard time see no profit in running these profitless flights. Airlines also fear that returning people can infect their crew members.

The government is negotiating with the two major prayers for subsidizing the domestic flights. These domestic flights will connect the main cities within the country and will make it easy for returning citizens to reach their home cities.

Australia has significantly reduced its domestic flights in the wake of the pandemic. At present, Virgin has suspended all flights except one daily flight between Sydney and Melbourne. Whereas Qantas is weekly flying a few domestic flights to the capital cities. The airports like Sunshine Coast, Gold Coast, and Alice Springs have been shut down as no flights are flying from these airports.

Virgin Australia seeks bailout package, enters trading halt

While the carrier is in talks with the Australian government for financial aid, it has requested a trading halt of its shares. Virgin Australia has asked for $1.4 billion (US$900 million) bailout. The company wants a trading halt on the 16 April 2020 morning or when it issues a statement regarding the halt.

The airline has stopped all its operations and grounded the flights amid countrywide lockdown. Only one domestic route and some charter flights are functioning. The Federal government has not addressed yet if it will grant the loan request by the airline.

Deputy Prime Minister Michael McCormack said that the government is already providing $1 billion aid to the airline industry. He also said that the country wants a two-airline sector.

On the other hand, Qantas has already secured A$1.05 billion loans. The loan is against seven of its Boeing 787-9s. Things have not been smooth for Virgin Australia as it posted losses over its previous seven financial years, and thus may struggle to get the required funding.

The carrier also seeks financial aid from its shareholders. However, Virgin Australia's chief executive Paul Scurrah said that like the airline, shareholders are also facing a cash crunch due to ongoing coronavirus crisis.

Virgin Australia's primary shareholders include Singapore Airlines and Etihad Airways. Also, the company's shareholders include the founder Richard Branson, and Chinese conglomerates Nanshan Group and HNA Group.

International travel industry bleeds cash amid COVID-19 crisis

The International Air Transport Association believes that the global airline industry requires US$200 billion as emergency support, and Boeing seeks US$60 billion aid to survive the cash crunch due to the ongoing crisis. IATA has cited that most of the airlines are going to lose all cash in the next two months.

Due to the travel bans and lockdown, all airline operations have come to a halt with only a few exceptions. The airlines are facing a substantial financial crisis while the government is taking all measures to stop the spread of the virus. The crisis has had a devastating effect on the airlines making them turn to the government for cash injections.

The Australian Airline Industry has probably been the most affected industry due to the COVID-19 pandemic. However, with the support from the government, improving lockdown situation, and neighbouring countries moving towards opening travel restrictions, the industry might start seeing some traffic in a couple of months.

Disclaimer