Global airline industry turns to respective governments for emergency financial support amidst the Coronavirus crisis

The Coronavirus pandemic and the associated travel restrictions are pushing the global airline industry to a near halt. On Monday, airlines announced the next round of jobs, costs, and flights cut and called for emergency aid from respective governments.

Following the cancelation of the majority flights in the upcoming weeks, Air France KLM (EPA:AF), EasyJet, and British Airways slumped further in the stock market on Monday. Finnair branded Coronavirus as the greatest crisis for the aviation industry in history as it declared its 2^nd profit warning in the past 3 weeks and reduced capacity by 90%.

U.S Expands Travel Restrictions To Ireland And The UK

In a recent development, the U.S expanded its travel ban to Ireland and the UK, Spain announced a state of emergency, and New Zealand and Australia demanded self-isolation from all travelers. The top three airline alliances of the world, SkyTeam, OneWorld, and StarAlliance, all gave an identical statement on Monday that requested emergency government aid to tackle Coronavirus driven unprecedented challenges.

International Airlines Group (NYSE:IAG) that has Spain’s Vueling and Iberia on its portfolio, said on Monday that a massive 75% cut in April-May capacity is expected. The group also delayed the retirement of its CEO (Willie Walsh) as it desired to keep Luis Gallego (successor) at Iberia and help the subsidiary tackle the economic impact of the health emergency.

In a separate announcement, IAG also resorted to temporarily suspending employment contracts, reducing working hours, and freezing discretionary spending. IAG’s low-cost competitor, EasyJet also said this morning that its fleet is likely to remain grounded in the upcoming weeks as it followed in the footsteps of Virgin Atlantic in seeking financial support from the government.

On Monday morning, IAG was reported trading 21.3% down in the stock market, easyJet 16.9% down, Wizz Air 19.5% down, and Air France-KLM 16.8% down.

Air France-KLM To Cut Operations By 90%

Air France-KLM was reported quoting this morning that it is currently negotiating emergency aid with the Dutch and French government. In the meantime, the company said, it will cut operations by 90% as its Boeing 747 and Airbus A380 fleets will remain parked.

As minimizing spending became a priority for airlines, net jet deliveries are expected to see a delay puts Airbus and Boeing at the risk of taking a significant hit. Airbus is trading around 16.7% down on Monday.

Other prominent airlines that have announced such drastic measures to cope with the impact of the pandemic and are seeking government aid include Germany’s TUI AG, Finnair, United Airlines, and Air New Zealand.

According to analyst Daniel Roeska of Bernstein:

“Airlines are siphoning cash and have no way of stopping it. As the carriers now rely heavily on government support, the key focus should be on emergency liquidity support and enabling short-term layoffs or working-hour reductions of safeguard cash.”