Airline industry in dire need of government aid

Australia’s Qantas is the latest global airline to cancel its international flights. Germany’s Lufthansa is also grounding temporarily 700 of its 763 aircraft, telling employees to go on leave and will not pay dividends this year. Singapore Airlines has cut its capacity by half while Scandinavian Airlines will cut most of its flights and will lay off 90% or 10,000 of its workforce.

THERE is nothing airlines can do to get people to fly with them. Demand is just drying up.

With so many countries closing off their borders to foreigners and placing travel restrictions, even discounted airfare doesn’t mean much. Air travel is no longer a priority as even corporations are restricting their executives from travelling to stop the spread of the virus. They are opting for video conferencing instead.

This has forced airlines globally to cut back on flights, some by 50%, others by 90% and more aircraft are being grounded daily. Airline employees are pushed to take unpaid leave as operations are trimmed.

A prolonged spread of the coronavirus (Covid-19) has seen demand for air travel collapse and that is disastrous for the airline industry. Millions of people, not just in the airline industry but also supporting services and supply chains, will lose their source of livelihood.

Australia’s Qantas is the latest global airline to cancel its international flights. Germany’s Lufthansa is also grounding temporarily 700 of its 763 aircraft, telling employees to go on leave and will not pay dividends this year. Singapore Airlines has cut its capacity by half while Scandinavian Airlines will cut most of its flights and will lay off 90% or 10,000 of its workforce.

Malaysia Airlines and Malindo Air told employees to take unpaid leave. With the lockdown, limited flights are operating.

Monthly cancellations are costing airlines millions of dollars and it far outpaces new bookings. The situation is getting worse by the day. Most airlines have waived the cancellation fees but many travellers want refunds.

Global airline chiefs have warned that as the outbreak prolongs, their airlines will not survive without government support and bailouts.

Forget about profits. The scenario is worst than that experienced after the September 11 terrorist attacks. International Air Transport Association’s (IATA) early prediction is that global airlines will lose US$113bil in revenue this year.

In the Asia-Pacific alone, the Association of Asia Pacific Airlines (AAPA) has forecast revenue shortfalls of more than US$60bil. AAPA believes over a million workers employed by the Asia-Pacific airline industry may lose their jobs in a worst-case scenario.

The longer this virus crisis drags, the worst will be the damage to the airline industry, which is a key driver of global economic development.

Airlines are in dire need of funding from the governments across the globe as they won’t be able to survive without cash injection. The US carriers want over US$50bil in government aid to help them through the challenging times. India is offering a US$1.6bil rescue package to aid its carriers. Several other countries have also come up with some packages, though some for the industry but none for the airlines.

That explains why IATA wants the African and Middle Eastern governments to do the same. It predicts the total government support needed worldwide would reach US$200bil.

This is a period of unprecedented collapse of travel demand and unless governments across the globe, Malaysia included, move fast enough to aid the airlines, there will be casualties.

The first such casualty is Flybe, and as the Centre of Aviation points out, without financial support, most airlines will be bankrupt by the end of May. Do we really have the luxury of time?

The views expressed here are the writer’s own.