SYDNEY/WASHINGTON • Shattered airlines were left counting the cost of government support as countries from the United States to New Zealand set out conditions for bailouts needed to absorb the shock of the coronavirus pandemic.
Conditions include provisions that loans may convert to government equity stakes, while US airlines cannot increase executive pay or provide “golden parachutes” for two years.
Air New Zealand’s bailout also depends on the company suspending its dividend and paying interest rates of 7 per cent to 9 per cent.
New Zealand yesterday offered its national carrier a NZ$900 million (S$756 million) lifeline, which Finance Minister Grant Robertson said would help it survive after the government banned all non-resident arrivals to the country.
“That puts us in a very good position over the next several months,” Air New Zealand chief executive Greg Foran told reporters of the loan, which it will not draw down immediately. “We would expect the airline industry will look different at the end of this. Not all airlines are going to survive.”
Under the US$58 billion (S$84 billion) US proposal for passenger and cargo carriers, the US Treasury Department could receive warrants, stock options or stock.
“We are not bailing out the airlines or other industries – period,” US Senate Appropriations Committee chairman Richard Shelby said. “Instead, we are allowing the Treasury Secretary to make or guarantee collateralised loans to industries whose operations the coronavirus outbreak has jeopardised.”
Norway will back airlines with credit guarantees worth up to 6 billion kroner (S$793 million), half of them to Norwegian Air Shuttle. Conditions include raising money from commercial banks and the equity market.
Finland, which owns a 56 per cent stake in Finnair, said it would guarantee a €600 million (S$930 million) loan for the state carrier. The firm said it was implementing a funding plan that included drawing on available credit lines and sale and leasebacks of planes.
The International Air Transport Association has forecast the industry will need up to US$200 billion of state support, piling pressure on governments facing demands from all quarters and a rapid worsening in public finances as economies slump.
“Money is very tight in most countries, so governments need to step back and be hard-nosed about any form of rescue… but it all must come with strict conditions or strings attached,” Endau Analytics’ head of aviation consultancy Shukor Yusof said in an e-mail.
Even with financial assistance, airlines around the world are placing thousands of workers on unpaid leave as they slash passenger capacity, deepening the shocks to local economies.
British Airways pilots will have to take two weeks of unpaid leave in both April and May, and a cut to basic pay spread over three months, the company said yesterday in a joint statement with the British Airline Pilots’ Association.
Britain’s Heathrow Airport, usually Europe’s busiest airport, is cutting costs by cancelling executive pay, freezing recruitment and reviewing all capital projects.
Air Canada has more than 5,100 excess cabin crew after cutting its flying schedule and plans to start notifying them that they will be laid off at least temporarily, its flight attendants’ union said.
The airline said that it had begun talks with unions about temporary lay-offs but did not have final numbers yet.
Yesterday, Cathay Pacific Airways said it would slash nearly all passenger capacity as new government curbs make travel more difficult.
Its low-cost carrier, HK Express, will suspend operations from Monday until April 30, bringing forward plans to put staff on unpaid leave.
To preserve cash, airlines are also cutting executive pay, suspending dividends, selling planes, and flying cargo on empty passenger jets.
This has led to surging cargo rates due to high demand – the only bright spot in the industry.
American Airlines said on Thursday that it would use some passenger jets to move cargo between the US and Europe, its first scheduled cargo-only flights since 1984, when it retired the last of its 747 freighters.
In the Asia-Pacific, Qantas, Cathay Pacific and Korean Air Lines are also operating some flights with empty seats but bellies full of cargo.
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