Airlines turn to cargo for revenue as U.S. Senate nears industry aid vote

SYDNEY/CHICAGO (Reuters) – Delta Air Lines Inc (DAL.N) and Air New Zealand Ltd (AIR.NZ) said they would offer cargo charter services on passenger planes to boost revenue as the U.S. Senate neared a vote on a bill to give its carriers $58 billion in aid, including payroll support.

The passenger travel industry has been decimated by the coronavirus pandemic, with Australia’s Flight Centre Travel Group Ltd (FLT.AX) on Thursday announcing plans to cut 6,000 travel agent roles globally, either temporarily or permanently.

Virgin Australia Holdings Ltd (VAH.AX) plans to permanently cut more than 1,000 jobs among the 8,000 staff that have been stood down due to cuts to its flying schedule, Chief Executive Paul Scurrah said.

“That is going to be heartbreaking for those people. This is no fault of theirs,” Scurrah told the Australian Broadcasting Corp on Thursday. “This is the worst airline crisis the industry has ever seen.”

New Zealand’s Auckland International Airport Ltd (AIA.NZ) said it had cut 90 contractors and was talking to its staff about reducing hours and salaries by 20% as demand plummets.

In the United States, United Airlines Holdings Inc (UAL.O) announced further cuts to domestic capacity, meaning its overall capacity, including international, will be down by around 68% in April.

The U.S. Senate is preparing to vote on an industry aid package, half in the form of grants to cover some 750,000 employees’ paychecks.

In a win for labor, companies receiving funds cannot lay off employees before Sept. 30 or change collective bargaining agreements.

The draft bill has restrictions on stock buybacks, dividends and executive compensation, and allows the government to take equity, warrants or other compensation as part of the rescue package.

In an effort to raise much-needed revenue and keep some planes in the air, Delta and Air New Zealand said they had joined the growing number of carriers offering cargo charters on passenger planes.

“We’ve shared these options with our global cargo customer base and are getting some strong interest from customers wanting to ship to and from Shanghai, Hong Kong, San Francisco, Los Angeles, Sydney and Melbourne,” Air New Zealand General Manager Cargo Rick Nelson said.

Around half the world’s air cargo normally travels in the bellies of passenger planes rather than dedicated freighters, so the cancellation of passenger flights has led to a sharp reduction in cargo capacity.

The International Air Transport Association (IATA), which represents the airline industry, said on Wednesday that red tape is holding up medical and other emergency supplies needed to help tackle the coronavirus crisis.

Examples include two shipments, each containing about five to 10 tonnes of medical supplies, bound for Latin America and currently held up in Dubai and India.

Figures to be published next week will show global air freight traffic fell around 10% in February, putting it on course for a 15%-20% drop for the year as a whole, IATA said.

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