COVID-19: US cases overtake China and Italy: CAPA update 27-Mar-2020

AACO outlines measures Arab governments could adopt to ease burdens on airlines

Arab Air Carriers' Organization (AACO) reported (19-Mar-2020) it has communicated with the Arab governments through the Arab Civil Aviation Organization encouraging them to adopt the following measures to support the industry during the COVID-19 pandemic:

• Taxes: AACO encouraged Arab governments to provide tax relief to airlines for at least a period of two years;
• Financial situation of airlines: AACO urged Arab governments to provide speedy financial support packages for airlines;
• Paying lenders and suppliers: AACO sought the support of Arab governments and other partners in aviation as well as other stakeholders to request lenders and suppliers to provide a grace period to airlines and refrain from any measures against them in the current situation, until air transport is back to the start of normalcy;
• User charges: AACO encouraged governments to support airlines in requesting airport operators and air navigation service providers to exempt airlines from paying parking fees during this time of emergency and to cancel or reduce other user charges paid by airlines;
• Liabilities under passenger rights regulations: AACO requested governments temporarily exempt airlines from passenger rights regulations as the current situation is considered to be force majeure that obliges airlines to cancel or delay their flights with short notice;
• Slots regulations: AACO asked the support of governments to exempt airlines from any slot rules applied in Arab airports;
• New costs related to containing the spread of the virus: Many airlines have introduced sanitisation measures and health monitoring devices. AACO requested governments to either compensate the airlines for the cost they are incurring under this category or to provide the tools needed for sanitisation and monitoring. [more - original PR]

IATA renewed (26-Mar-2020) calls for "urgent action" from European governments to provide financial support to airlines in response to the coronavirus (COVID-19) outbreak.

According to IATA's current estimates, European carriers are expected to lose USD76 billion in revenue in 2020 due to the virus, with passenger demand projected to decline 46% year-on-year. IATA warned such a decline puts at risk about 5.6 million jobs and USD378 billion in GDP supported by air transport. IATA detailed some of the impacts at the national level as follows:

• UK: 113.5 million fewer passengers resulting in a USD21.7 billion revenue loss, risking almost 402,000 jobs and around USD32.7 billion in contribution to the UK economy;
• Spain: 93.7 million fewer passengers resulting in a USD13 billion revenue loss, risking 750,000 jobs and USD49.4 billion in contribution to Spain's economy;
• Germany: 84.4 million fewer passengers resulting in a USD15bn revenue loss, risking 400,000 jobs and USD28 billion in GDP;
• Italy: 67.7 million less passengers resulting in a USD9.5 billion airline revenue loss, risking 256,000 jobs and USD67.4 billion in contribution to GDP;
• France: 65 million fewer passengers resulting in a USD12 billion revenue loss, risking 318,000 jobs and USD28.5 billion in contribution to France's economy. [more - original PR]

Spirit Airlines announced (26-Mar-2020) it will reduce capacity by approximately 45% in Apr-2020 and 75% in May-2020, as a result of reduced travel demand and government restrictions. Measures are being taken to reduce costs, including the following:

• Company wide freezing hire, with the exception of essential front line and management roles;
• Suspension of USD50 million to USD75 million in planned non aircraft capex;
• Additional financing secured through unencumbered assets;
• Reduction of non fuel operation costs by USD20 million to USD30 million, excluding savings made by reduced capacity;
• Discussions with significant stakeholders and vendors regarding contract adjustments or financial support;
• Reduction of CEO and president base salary by 30%;
• Reduction of compensation for all SVPs, EVPs and board of directors members. [more - original PR]

COVID-19: Bailouts for Airport investors? Only China plans expansion

Much is made of the disastrous impact of the current COVID-19 coronavirus pandemic on the airline sector, but airports are suffering too, of course, and those organisations which invest in airports must reappraise their strategies. The remorseless progress of the coronavirus globally is threatening the world's air transport and tourism industries in 2020 and beyond.

A company does not easily come back from disasters of this order, even if the mechanics and infrastructure of the industry remain in place.

In most countries the majority of airports are still state-owned (central, regional or local government); in others, the private sector runs the show. Those private sector investors entered the business because it was perceived as a safe haven for pension funds, for example, with perhaps relatively low returns but proven longevity.

Now, the airports, like the airlines, will hit severe cash flow problems quickly, if they have not already. While some airport development projects will continue because too much time and energy has already been invested to do otherwise, others will inevitably be delayed and possibly for years, rather than months. That is hardly an enticing prospect to a potential investor.

For some, perhaps many, airport investment is not going to look like the long term cash cow it was up until January of 2020.