Airlines call for government help

easyJet

easyJet said that European aviation faced “a precarious future” and there was “no guarantee that the European airlines …will survive”.

The company joined Virgin, Ryanair and IAG in calling for government aid to maintain access to liquidity, a message which was being echoed across the hospitality sector, with TUI confirming that it had applied for state aid.

TUI Group said: “We are taking substantial cost measures to mitigate the earnings effect. Moreover, we have decided to apply for state aid guarantees to support the business until normal operations are resumed.”

The group has suspended “the vast majority of all travel operations” until further notice, including package travel, cruises and hotel operations. The temporary suspension was aimed at contributing to global governmental efforts to mitigate the effects of the spread of the COVID-19.

In light of the, the board has withdrawn guidance and declined to issue any further.

The company said that it had cash and available facilities of approx. €1.4bn and that year-to-date performance had been in-line with expectations prior to COVID-19.

At easyJet, CEO Johan Lundgren said: “At easyJet we are doing everything in our power to rise to the challenges of the Coronavirus so that we can continue to provide the benefits that aviation brings to people, the economy and business. We continue to operate rescue and repatriation flights to get people home where we can, so they can be with family and friends in these difficult times.

"European aviation faces a precarious future and it is clear that coordinated government backing will be required to ensure the industry survives and is able to continue to operate when the crisis is over."

The carrier said that due to the unprecedented level of travel restrictions being imposed by governments in response to the Coronavirus pandemic and significantly reduced levels of customer demand, it had undertaken “significant cancellations”.

The company said that it maintained a strong balance sheet including a £1.6bn cash balance, an undrawn $500m revolving credit facility, unencumbered aircraft worth in excess of £4bn and “a large and valuable slot portfolio”.

A number of airlines wrote to UK prime minister Boris Johnson to warn that the sector needed immediate financial aid of between £5bn and £7.5bn.

Airlines UK said: “The time for action is now. No more delays or prevarication or bean counting. We’re talking about the future of UK aviation – one of our world-class industries – and unless government pulls itself together, who knows what will be left of it once we get out of this mess.”

A UK government spokesman said: “We recognise how difficult the current situation is for the aviation sector and, across government, we are engaging with the sector’s leadership to support workers, businesses and passengers.

“We have influenced the European commission to relax flight slots, and HMRC is ready to help all businesses, including airlines, and self-employed individuals, experiencing temporary financial difficulties due to coronavirus.”

The Centre for Aviation said: “By the end of May-2020, most airlines in the world will be bankrupt. Coordinated government and industry action is needed - now - if catastrophe is to be avoided.

“As the impact of the coronavirus and multiple government travel reactions sweep through our world, many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants.

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

“Forward bookings are far outweighed by cancellations and each time there is a new government recommendation it is to discourage flying. Demand is drying up in ways that are completely unprecedented. Normality is not yet on the horizon.”

 

Insight: The need for government to step in across the hospitality sector is now pressing. The airline industry has been quick to dial up the lobbying and  - justifiably - make its case as a key component of the global infrastructure.

Hotels need to do the same and in the coming days you will hear us raise our voices to make the case for state aid for a sector which provides jobs, community, a home from home. Even the Centre for Aviation was good enough to point this out, describing the tourism and travel industry which it ferries people around for as accounting for “20% of all new jobs in recent years, importantly in developing countries”.

But we cannot hang on the coat tails of the airlines. The total global contribution of travel and tourism was $8,811.0bn in 2018,10.4% of GDP, and was forecast to rise by 3.7% pa to $13,085.7bn by 2029. Travel & Tourism generated 122,891,000 jobs directly in 2018, accounting for 3.8% of total employment.

In asking for aid in the UK, UKHospitality CEO Kate Nicholls, said: “We have seen political institutions across the UK making generous provision for business. However, while these measures would be incredible in normal times, hospitality is at an existential crossroads. The sector is genuinely facing catastrophe.”

It is, but through no fault of its own. This is not a problem with a product. To reassure the shareholders seeing their investments tank, all that is needed is governmental support, support which we will be asking for in coming days. Please join us to form one voice.

 

 

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