Airlines are stepping up calls for emergency state aid

Updates on the coronavirus pandemic

Sign up for myFT Daily Digest to be the first to know about the latest news on the coronavirus pandemic.

Airlines have stepped up calls on governments to provide billions of dollars in emergency aid as the crisis engulfing the aviation industry deepens.

As countries around the world prepare to impose closures and travel bans to tackle the coronavirus pandemic, EU officials said on Sunday they were working on new measures to help airlines navigate in light of the worsening situation, which could be revealed in a few days.

EU Executive Vice-President and Competition Commissioner Margrethe Vestager signaled last week that her office was drafting EU-wide guidelines and said it was ready to act to ensure that countries can help sectors in difficulty much more quickly.

Some governments have already started discussions with airlines on possible state aid.

Wopke Hoekstra, the Dutch finance minister, said on Sunday that the Netherlands would do “whatever it takes” to keep Air France-KLM in business. Mr Hoekstra gave no details of a possible bailout, but insisted that the Franco-Dutch carrier was “vital” to the Dutch economy.

At the same time, the French government was also preparing to come to the aid of the Air France-KLM group. Senior finance ministry officials have said they are considering lending rather than increasing their stake, although the latter remains an option.

Alitalia, the Italian national airline, has already received 900 million euros in emergency loans since 2017 from the Italian government and is in large deficit. Grounding planes across Europe should force Rome to pump more money into the airline to keep it afloat.

The crisis facing the airline industry intensified over the weekend as the United States extended its travel ban to include the United Kingdom and Ireland and several countries imposed blockages, while others have enforced strict entry rules in an attempt to limit the spread of the virus.

Peter Norris, chairman of the Virgin Group, majority shareholder of UK carrier Virgin Atlantic, has urged the UK government to provide up to £ 7.5bn in state of emergency support to save the UK aviation industry, which was decimated by the coronavirus epidemic.

Mr Norris said he would send a letter to Prime Minister Boris Johnson this week warning him that even major airlines could be dangerously short of cash due to the drop in demand.

While the UK government has acknowledged “how difficult the current situation is” for the aviation industry, it has not said it will offer state loans. A spokesperson said the government had helped pressure the EU to relax slot rules at airports which pressured airlines to fly empty planes. The UK tax administration has said it will help businesses in temporary financial difficulty, through structured tax plans or waiving late penalties and interest.

The German government is meeting with airlines at the Economy Ministry on Monday to discuss the prospect of state support. Lufthansa, which intends to remove its dividend to preserve cash, has raised 600 million euros, but has announced plans to use its aircraft fleet, which has a book value of around 10 billion euros. euros, for additional funding.

Meanwhile, America’s three largest carriers, United, American and Delta, said they were in talks with the federal government over possible help. American Airlines announced on Saturday that it plans to cut 75% of its international flights until May 6 after the US government widened its ban on travel to the UK and Ireland.

In Brussels, Ms Vestager said authorities were already approving financial aid to businesses by EU member states. Last week, Denmark became the first country to receive approval within 24 hours for a € 12 million program to compensate businesses for damage caused by conciliations of major public events in the wake of the coronavirus. Scandinavian national carrier SAS said on Sunday it was laying off 90% of its workforce due to the dramatic drop in demand.

Managing Director Rickard Gustafson said the airline, which is partly owned by the Swedish and Danish governments, will temporarily lay off 10,000 workers and cut many of its flights.

Olivier Guersent, EU director general for competition, told reporters last week that it was “very likely that all airlines will suffer a lot from this crisis”. just so that they don’t find themselves in a very difficult situation just because of the crisis.

Additional reporting by David Keohane in Paris, Claire Bushey in Chicago, Joe Miller in Frankfurt and Richard Milne in Oslo

Letter in response to this article:

Subscribe to bailout of airlines with rights issues / By Martin Allen, London, UK