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The progressing Covid-19 pandemic flare-up has unleashed ruin on the global aviation sector by causing lockdown and travel limitations, alongside carrying the world to an unseen and unprecedented halt. The airline carrier administrators alongside the aircraft manufacturers have been hit hard by the worldwide lockdown.
The sector looks forward to a bailout package from the governments around the globe. The Finance ministry alongside the central banks’ world over is being expected to make exceptional arrangements for the airline sector by providing them with a special package. The aviation sector contributes a lot to the world’s economy in terms of job creation. Therefore, this sector requires a dedicated fiscal stimulus in order to survive. The sector has been keeping crucial supplies intact like PPE and other health care items even in this hour of extraordinary emergency.
The airline industry in the United Kingdom has called for liquidity infusions, credits, and assessment reliefs by the British government and requested its mediation. Despite what might be expected, the Finance ministry requested that the airline administrators to raise assets from existing investors and did not guarantee any special package for the bailout of the aviation sector.
Amid the novel coronavirus outbreak, UK carriers, like EasyJet (EZJ.L), IAG-possessed (ICAG.L) British Airways and Virgin Atlantic have practically no income coming as the world has been locked out and travel restrictions are imposed, driving them to ground planes, and putting a huge number of related occupations and the eventual fate of the industry in danger.
Easyjet Plc would consider reducing expenses by £4.5 billion. Amid the worldwide emergency, the Bank of England and Treasury have provided the organisation with £600 million advance. The company is probably going to raise another £407 million from lenders to ensure business continuity.
International Airlines Group (LON:IAG) recently announced that British Airways has gone for one year extension of its USD Secured Revolving Credit Facility (from 23rd June 2020 to 23rd June 2021). The sum of $1.38 billion would be accessible under the extended facility. IAG possesses solid liquidity with enough cash at its disposal and has not drawn any amount on any of its facilities. Also, the Group is exploring various operational methods and financing activities to increase further its income and cash flow.
Chaos in the industry and Virgin Atlantic
Sir Richard Branson, who is said to be the seventh richest person in the United Kingdom with an estimated worth of £4.7 billion had lived on Necker Island in the British Virgin Islands for the last 14 years without paying any taxes, has requested the government to intervene and now plans to raise funds in order to revive his Virgin Atlantic airline by mortgaging his private Caribbean island.
This was the second time, Branson came with a plea for taxpayer money, as the government did not entertain Virgin Atlantic’s initial proposal for a £500 million bailout package. Instead, the airline was told to explore other methods to raise funds and rejected its proposal.
As the company is going through devastating impact of the pandemic, Branson pledged his island as a security against a £500 million loan for his airlines from the government in order to weather this storm. However, Branson faced severe criticism for seeking taxpayer money in order to rescue the airline rather than using his own net worth. Branson has reportedly paid no income tax as an individual for nearly 15 years since moving to the tax-free British Virgin Islands. The billionaire has though stated that his proposal is about pledging the island as security against commercial loans and not collateral on loans from the UK taxpayer.
British business magnate Sir Richard Charles Nicholas Branson founded Virgin Atlantic in 1984, which is an airline carrier headquartered in London. The air carrier operates most of its flights from Gatwick airport, Heathrow airport and Manchester airport in the United Kingdom. The company has a decent fleet size and operates on several routes. Recently, Richard Branson flagged off his first cruise ship, which was launched for young travellers and holidaymakers despite the deadly virus outbreak. As a result, hundreds of people were infected. It was the first ship from the fleet of four which sailed under the name of Virgin Voyages.
Way forward for the aviation sector
The coronavirus pandemic has brought air travel to a sudden halt the world over. Government limitations and stay-at-home requests have prevented travellers of crossing borders or going out for public squares or mass gatherings, plunging the number of flight bookings. Domestic travel, along with international travel has been hit badly. In the wake of these sudden changes, airline businesses are looking forward to putting back their aircraft in the air once the threat of the pandemic is behind us. There is a lot of effort required from the associations, regulatory bodies, and governments around the world to put the world aviation sector back in action. As per IATA, the overall turnover for aviation businesses are probably going to diminish by 50 per cent in the year 2020.
The rapid spread of the deadly pandemic has hit the aviation sector quite severely. According to the World Health Organisation (WHO), around 200 thousand people have died across the world with this contagious virus.
IATA (International Air Transport Association), however, looks for restoration for the aviation industry and greasing its wheels. IATA has approached the authorities for liquidity infusion for supporting both load and traveller aircraft during the coronavirus emergency for diminished turnover and cash flows.
Furthermore, to provide extra cushion for the industry, IATA calls upon relaxed norms from the authorities and central banks to direct financial institutions to give easy access to Loans and corporate securities, which is a preferred method of raising money in the aviation sector. The supreme authority looks for relief in tax assessment along with relaxation in loan repayment for the financial year 2020.
Likewise, as the skies are shut, it is imperative to take note of the lofty dive in ozone-depleting substances discharges and its effect on the earth. Before the disaster brought about by the destructive Covid-19, the carbon emissions from the airline sector have been rising steadily and surged by 200 per cent in two decades (in the period between 1990 and 2019). Accordingly, the governments must remember these environmental factors before rolling out relief packages for the airline industry.
