COVID-19 has taken its toll on the aviation industry, with no signs of a quick recovery. Necessary restrictions in international travel along with general lack of demand as people stay home has put the industry in a dire economic position. The response from governments around the world varies greatly.
On March 24, the British Chancellor Rishi Sunak told airlines not to look to the government and to find other means of financial support. He added that the government would enter into negotiations with airlines only after they had exhausted all other means of support.
“Airlines are fighting for survival in every corner of the world. Travel restrictions and evaporating demand mean that, aside from cargo, there is almost no passenger business. For airlines, it’s apocalypse now. And there is a small and shrinking window for governments to provide a lifeline of financial support to prevent a liquidity crisis from shuttering the industry,” said Alexandre de Juniac, the International Air Transport Association’s (IATA) Director General and CEO.
While the U.K. government may be (at least for now) turning its back on the industry, other countries have provided much-needed support.
Australia announced an A$715 million (US$430 million) aid package comprising refunds and forward waivers on fuel taxes, and domestic air navigation and regional aviation security charges.
Brazil is allowing airlines to postpone payments of air navigation and airport fees.
China has introduced a number of measures, including reductions in landing, parking and air navigation charges as well as subsidies for airlines that continued to mount flights to the country.
The Hong Kong Airport Authority (HKAA), with government support, is providing a total relief package valued at HK$2.6 billion (US$335 million) for the airport community including waivers on airport and air navigation fees and charges, and certain licensing fees, rent reductions for aviation services providers and other measures.
New Zealand’s government will open a NZ$900 million (US$580 million) loan facility to the national carrier as well as an additional NZ$600 million relief package for the aviation sector.
Norway’s government is providing a conditional state loan-guarantee for its aviation industry totaling NKr6 billion (US$533 million).
Qatar’s Minister of Finance has issued a statement of support for the national carrier.
Singapore has undertaken relief measures valued at S$112 million (US$82 million) including rebates on airport charges, assistance to ground handling agents, and rental rebates at Changi Airport.
Sweden and Denmark announced $300m in state loan guarantees for the national carrier.
IATA says the European Central Bank, and U.S. Congress are expected to enact significant measures to aid the airline industry in their respective jurisdictions as part of large packages of broader economic measures in coming days.
The U.S. airline industry said it would need around $58 billion in aid to recover from the impact of COVID-19. President Trump has said, “as far as the airlines are concerned, we are going to back the airlines 100%”.
President Trump’s entire stimulus package, announced late March 25, is expected to be in the region of $1.8 trillion. This includes $32 billion in grants for the airline industry. A further $25 billion will be available in the form of loans or loan guarantees for passenger airlines and £4 billion for cargo airlines.
The package also includes $3 billion to pay airline and airport contractors, and $10 billion for airports.
There are restrictions on furloughing employees, issuing dividends, and making paycuts for companies wishing to make use of the stimulus package, and these will run through September.
The U.S. aviation community has also been asked to continue service on routes that serve the needs of small and remote communities to maintain healthcare and supply chains.
According to IATA’s latest analysis, released March 24, annual passenger revenues will fall by $252 billion globally if severe travel restrictions remain in place for three months. That represents a 44% decline compared to 2019. This is well-over double IATA’s previous analysis of a $113 billion revenue hit that was made before countries around the world introduced sweeping travel restrictions.
“It did not seem possible, but in a matter of days, the crisis facing airlines worsened dramatically. We are 100% behind governments in supporting measures to slow the spread of COVID-19. But we need them to understand that without urgent relief, many airlines will not be around to lead the recovery stage. Failure to act now will make this crisis longer and more painful. Some 2.7 million airline jobs are at risk. And each of those jobs supports a further 24 in the travel and tourism value chain. Some governments are already responding to our urgent calls, but not enough to make up the $200 billion needed,” said de Juniac.
Governments can help the industry stay solvent and commence normal operations after the pandemic by considering one or more of three essential measures:
- Direct financial support to passenger and cargo carriers to compensate for reduced revenues and liquidity attributable to travel restrictions imposed as a result of COVID-19.
- Loans, loan guarantees and support for the corporate bond market by the government or Central Banks. The corporate bond market is a vital source of finance, but the eligibility of corporate bonds for central bank support needs to be extended and guaranteed by governments to provide access for a wider range of companies.
- Rebates on payroll taxes paid to date in 2020 and/or an extension of payment terms for the rest of 2020, along with a temporary waiver of ticket taxes and other government-imposed levies.
Public health is the priority right now, but governments must not lose sight of the bigger economic challenge, which looks set to outlast COVID-19 and bring a host of new problems if not addressed.
This story was updated on March 26 to include data from the U.S. government’s stimulus package.