Tag: AIRLINES

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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DUBLIN/OSLO (Reuters) – The grounding of virtually all flights by Europe’s largest budget airline and European air traffic data on Tuesday highlighted the enormity of the shock to aviation industries from the coronavirus now emptying skies around the globe.

Ryanair (RYA.I) told customers it had virtually written off the next two months, while European air traffic management body Eurocontrol said volumes on Monday were down more than 75% from the same day last year.

“We do not expect to operate flights during the months of April and May at this time,” Ryanair boss Michael O’Leary said in a message to customers.

The coronavirus pandemic is also taking a heavy toll on aerospace manufacturing, with Boeing (BA.N) saying it would halt production of most widebody jets and European rival Airbus (AIR.PA) resuming only partial output on Monday after a four-day shutdown as suppliers cut jobs.

With flights grounded because of a collapse in demand over fears of contagion and reinforced by air travel restrictions, airlines, planemakers and their suppliers are under pressure to save cash to ride out the squeeze in liquidity.

Ratings agency Moody’s has cut its outlook for the aerospace and defence industry to negative from stable and warned that, the damaged balance sheets of most airlines would hurt demand for new aircraft even after the market begins a recovery.

Global passenger capacity fell 35% last week, the worst since the start of the crisis, according to data from airline schedules business OAG, which said deeper cuts are likely in the coming weeks.

More than 2,500 planes have been grounded this year, data from Cirium shows, with taxiways, maintenance hangars and even runways at major airports turning into giant parking lots.

Asian jet fuel refining margins – the difference in value between raw crude and the refined product – turned negative on Tuesday for the first time in more than a decade, suggesting there was no recovery timeframe in sight for the aviation industry.

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Large U.S. carriers have drafted plans for a possible halt in U.S. passenger air traffic, four officials said on condition of anonymity, though there is no plan in place and U.S. President Donald Trump said on Monday that he was not considering a domestic travel ban.

SHUTDOWNS

Boeing faces the shutdown of key assembly lines for the second time in a year after being forced to halt production of its grounded 737 MAX aircraft in January.

Production of long-haul jets such as the 787 and 777 in Washington state will pause for 14 days from Wednesday, plunging the world’s largest industrial building – Boeing’s wide-body plant at Everett north of Seattle – into silence for the first time in memory.

As the crisis deepens, Democratic U.S. lawmakers have proposed that some of the roughly $58 billion in proposed emergency aviation loans be changed to cash grants to cover payroll costs.

Embraer (EMBR3.SA), meanwhile, will furlough all non-essential workers in Brazil, where it makes regional jets, the world’s third-largest aircraft manufacturer said on Sunday.

Joining the list of temporary shutdowns is Bombardier (BBDb.TO), which is suspending Canadian production of business jets, said a source familiar with the matter.

Airbus called for strong government support for airlines and suppliers but stopped short of calling for direct aid for the company, which has secured an extra 15 billion euros ($16.14 billion) of commercial credit lines.

However, the planemaker has told officials privately that it may need European government help if the crisis lasts for several months, Reuters reported last week.

Struggling Norwegian Air (NWC.OL), which has grounded most of its aircraft and temporarily laid off 90% of staff, said on Tuesday that it had secured an initial cash infusion of 300 million Norwegian crowns ($26.6 million) from the government.

Industry executives said that a major source of alarm was the global chain of thousands of suppliers who would be severely hurt by abrupt stop-start movements in plane output. Many have already taken a hammering from the year-long 737 MAX grounding.

The International Association of Machinists and Aerospace Workers on Monday said that more than 500,000 U.S. aerospace production jobs could be in jeopardy and called for a relief package that included provisions to protect against layoffs.

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CHICAGO/WASHINGTON (Reuters) – Democratic U.S. lawmakers on Monday proposed giving struggling U.S. airlines and contractors $40 billion in cash grants that would not have to be paid back but require significant new environmental, labor and other conditions.

The U.S. House of Representatives bill, which provides $2.5 trillion in stimulus and assistance to the U.S. economy in the face of the coronavirus outbreak, would award $37 billion in grants to airlines and $3 billion in grants to employees of ground-support and catering contractors.

Airlines could also receive $21 billion in loans that would be at zero percent financing for the first year.

Republicans and Democrats were still struggling on Monday to reach agreement on a far-reaching coronavirus stimulus package, including the airline aid, after failing to reach a deal over the weekend.

Republicans have opposed providing bailouts to the passenger and cargo carriers, proposing help in the form of $58 billion in loans and saying the government could demand stock, options or other equity as part of those loans.

The House bill would also set aside $1 billion to eliminate high-polluting airplanes. It would cap chief executive pay at no more than 50 times the median pay of employees and bar stock buybacks.

It would also require that “no additional aircraft heavy maintenance work is outsourced to repair stations abroad” and require airlines to have a labor union-designated director.

Airlines would have to maintain “at least $15 minimum wage for all employees or contracted workers.”

Airlines receiving assistance would need to fully offset their carbon emissions starting in 2025 and reduce carbon emissions by 50% by 2050. They would also be required to tell customers the amount of carbon emissions attributed to their flights.

Airlines made a plea over the weekend that $29 billion of $58 billion sought in assistance be in the form of cash grants. In return, they offered to make no job cuts through Aug. 31 and to accept curbs on executive pay and forgo paying dividends or stock buybacks.

Airlines including United Airlines Holdings Inc UAL.N have also said they are encouraging employees to apply for voluntary unpaid leaves of absence among other measures aimed at saving costs. [nL1N2BA2X4]

Globally, the number of scheduled flights last week was down more than 12% from a year ago, flight data provider OAG said, and many airlines have announced further cuts to come as demand continues to drop.

Southwest Airlines Co (LUV.N) became the latest U.S. airline to slash its capacity by about 25% on Sunday, bringing forward and increasing cancellations that were initially due to run between April 14 and June 5. The cancellations include the suspension of all international flying until May 4, it said.

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CHICAGO/WASHINGTON (Reuters) – Shares in U.S. airlines fell sharply on Wednesday after Washington proposed a rescue package of $50 billion in loans, but no grants as the industry had requested, to help address the financial impact from the deepening coronavirus crisis.

The Trump administration’s lending proposal would require airlines to maintain a certain amount of service and limit increases in executive compensation until the loans are repaid.

The largest U.S. airlines — American Airlines Group Inc (AAL.O), Delta Air Lines Inc (DAL.N) and United Airlines Holdings Inc (UAL.O) — are drastically reducing flights, parking jets, raising capital and cutting costs including executive pay as part of measures to save cash as air travel demand takes an unprecedented downturn.

But the industry says government assistance is also needed to avoid collapse, airlines are working behind the scenes to convince lawmakers to still make a significant chunk of it in grants.

Their request for aid has faced pushback from some lawmakers demanding that any government package include protections on employees and a ban on share buybacks. The top five U.S. airlines spent around $44 billion in share buybacks between 2014 and 2019, according to data compiled by Reuters, spurred in part by a 2017 tax-cut windfall.

Democratic lawmakers, including U.S. Senate Democratic leader Chuck Schumer, said that money could have been put into a rainy day fund.

Democratic Senator Chris Murphy said Wednesday that sentiment is shifting over a rescue package because “there is no straight-face justification to give no-strings-attached cash to an industry that had the chance to use massive profits and tax cuts to build a rainy day fund, but instead used the money to pad investor returns and executive pay.”

U.S. Senator Elizabeth Warren said on Twitter that “any money should come with serious long-term change to the companies – no more buybacks, a $15 minimum wage, and more.”

In their push for aid, airlines have touted the role their services will play in revamping the global economy.

“When this pandemic passes – and it will – air travel will play a major role in getting life back to normal and supporting economic recovery. We are going to need significant government help to do that,” JetBlue Airways Chief Executive Robin Hayes and President Joanna Geraghty said in a memo on Wednesday.

JetBlue (JBLU.O) said its customer cancel rate was more than 10 times the norm, forcing it to suspend more flights and review its fleet plans.

Delta on Wednesday said it was parking more than 600 jets and scaling back its flying by more than 70% until demand begins to recover, with revenues seen declining by $2 billion in March.

Delta Chief Executive Ed Bastian, who likened the steps to hitting a “pause button” on operations, said in a memo to employees he was optimistic about industry support from the White House and Congress but would continue taking “all necessary self-help measures.”

Delta shares closed lost 26% lower, while United stock was down 30% and American 25%.

U.S. airline and flight attendant groups, trying to prevent tens of thousands of job losses, were also supporting companies’ push for aid.

“Our focus is on saving the industry and doing it in a way that is worker focused,” Sara Nelson, president of the Association of Flight Attendants union representing 20 airlines including United, told Reuters.

Meanwhile, business and industry events continued to ground to a halt.

Two European air shows – the Berlin Airshow and Geneva’s EBACE business-jet convention – have been canceled, organizers said on Wednesday, leaving uncertainty over this year’s main industry showcase, the Farnborough Airshow in July.

Organizers of the British event are in a wait-and-see mode so far.

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