[blackwasp]

Global aviation is shutting down because of the coronavirus outbreak and travel restrictions designed to contain it, and many airlines will need government bailouts within weeks or face bankruptcy.

Airlines across the world are grounding planes, laying off workers and scrambling to preserve cash as measures to contain the outbreak prompt flight bans and wipe out global travel demand.
The three biggest global airline alliances, oneworld, SkyTeam and Star Alliance, urged governments to "evaluate all possible means" to assist the industry. They represent more than 58 of the world's leading carriers. Some European airlines have already issued urgent appeals for help.

Virgin Atlantic, which has asked staff to take two months unpaid leave, said in a statement Monday that the United Kingdom's aviation sector alone will need government support of between £5 billion and £7.5 billion ($6.1 billion and $9.2 billion).
Heavily indebted budget carrier, Norwegian Air said Friday that it needed urgent help from government to strengthen its cash position. "We welcome the fact that the government has decided to remove aviation taxes in Norway, but sadly, this is not enough as we're in a very demanding situation at the moment," it said in a statement, asking government to ramp up its response.

Source

[libranof1987]

There's a storm coming!

The corona epidemic is terrible news for an already fragile and financially-volatile industry. With several countries (including India) having already blocked flights from certain geographies, and the list only increasing, lay-offs or unpaid time off are only a matter of time.

The Boeing 737Max situation and now this, things don't look very bright. We might just see 9/11-like developments; this time, much worse, since they're on a global level, not specific to the US.

[ast.ggn]

Domestic airlines are also under pressure. Go-Air terminating employees under contract. Came across this article.:

https://m.timesofindia.com/business/...w/74689550.cms

Low cost carrier GoAir, which suspended its international operations on Tuesday, has begun issuing termination letters to some of its employees who are on contract, said sources. These would be the first lot of job losses in the Indian airline industry citing COVID-19 impact on revenues.
One of the letters sent by the airline to an employee on March 16 says, "We are unable to operate on the scale we presently were and have been forced to scale down the operations to be able to sustain this decline … In view of the above, we are constrained to terminate your contract effective March 17 ... your full and final settlement would e done in due course." The said employee had joined GoAir in August last year.

[GTO]

Just when you think the airlines have seen the worst of times, comes this brutal pandemic! Industries like the airline business are hit harder than most as there is almost a complete stop on travel (whether leisure or business) and their enormous fixed costs. Right now, either the main airlines are strong or have solid groups backing them (e.g. GoAir & Wadias). But if the situation continues, the smallest will get wiped out.

Whoever has been flying low on working capital is finished. "Working Capital" is really key for any business - small or large - that survives this storm.

[theflyingguy]

The time is really bad for the Aviation industry right now. To put it into perspective, the big carriers like Lufthansa, American, Delta etc. are running at only 15% capacity. Some European carriers have completely grounded the fleet. The ones who do not have home airports are paying excessive parking and maintenance charges. The smart airlines are using this time to park in Hanger and doing the face lifts and upgrades but that number is significantly lower.

The airlines with some minor financial issues which would have been otherwise ignored are now gasping for life. "Flybe" used to be one of the biggest operator in Europe and was working a financial arrangements for $100 million. But the Corona virus proved a last straw and the airline went kaput.

Apart from state or conglomerate backed airlines, no one has money to survive this storm. Right now, it is forced unpaid leaves which will turn to chapter 11 if things continue as is for next 6/8 weeks.

This is looking bad for consumers also. Once the virus is history and the suppressed demand will come back surging, there would be no capacity to accommodate this demand. This will lead to significantly high prices for anyone and every who wishes to travel via air. Again for example, "Flybe" used for fly 8 million passengers annually and now that the airline is not there, some capacity will be left un-utilized and will consumer costs.

[karan0009]

And the impact has started in India. Indigo announced salary cut upto 25% due to COVID-19.

IndiGo's CEO Ronojoy Dutta on Thursday informed employees about a company-wide top down 5%-25% salary cut in a cost-cutting exercise in reaction to the coronavirus crisis which has dismantled airline operations in India and across the world.

In an email, Dutta said he was taking a 25% cut, while other executives above the senior vice president level would take 20% reductions. Vice presidents and pilots would have to bear a 15% cut, and others, including cabin crew, would be in for 5%-10 deductions.

http://https://economictimes.indiati...w/74708383.cms

[srini1785]

Not surprising. Its survival of the fittest in all kinds of business. Go air ( Wadia), Vistara ( Tata) may survive. It would be a problem for Indigo and spicejet as they don't have that kind of corporate banking. I would not be surprised if Air india gets a revival with govt backing. Airlines were struggling with thin margins and high operational cost and this corona thing may just be the CTR+ALT+DELETE that the airlines (or any industry)needed. I am totally against Govt intervention though. Leave it to natural selection ( read market economics).

Positive effect : Global greenhouse gas emission hits an all time low. A virus did what powerful leaders could not.

Its a strange world.

[libranof1987]

No international flights to land in India for a week, starting, 22-March.

https://www.ndtv.com/india-news/coro...a-week-2197474

[nikhilthegunner]

Originally Posted by srini1785

Not surprising. Its survival of the fittest in all kinds of business. Go air ( Wadia), Vistara ( Tata) may survive. It would be a problem for Indigo and spicejet as they don't have that kind of corporate banking. I would not be surprised if Air india gets a revival with govt backing.

Indigo will be fine. They've got huge cash reserves last I checked. Spicejet will have huge problems. Air India will definitely receive a bailout cause they need AI to be alive long enough for some gullible people to take control of it. Then it can collapse and the government wouldn't care.

[msdivy]

When the airlines were raking in profits, they didn't save for the rainy day. They paid hefty dividends, went for share-buyback (why??), paid a big bonus to their executives.

Now when the crisis has hit the ceiling, they want public money. These bailouts have made certain sectors zero-risk business. They can take all when they are winning. When they lose, they want their loss to be compensated.

[V.Narayan]

Some international airlines will fold up. Sad but true. The last similar global occasion for this industry was 9/11 in 2001. Several airlines did go bankrupt as a direct and indirect consequence of 9/11. Amongst the better known were Ansett (Australia), Sabena (Belgium) Air Canada (Canada), Swiss Air (Switzerland), US Air (USA) etc. On the global front it is likely something similar will repeat. In many ways the drop in traffic is greater and could be for a more extended period.

Airlines is an industry that every self-respecting frequent flyer believes he knows and most certainly has an opinion on.

Airlines suffer from a very very high fixed cost and a relatively smaller variable cost while the revenue can jump around from quarter to quarter due to external factors over which the airline often has zero control. In this respect it is similar to the hotel industry. Fixed costs here are aircraft lease rentals, airport parking fee, employee costs among the main ones. Semi-fixed but more fixed than semi are scheduled maintenance costs. An aircraft gobbles up tens of thousands of $ simply to be kept standing. Variable cost is mainly fuel which in India attracts unusually higher taxes which add to the burden. In addition to this the slightest disturbance in the international politico-economic environment and your revenue-seat-kms get instantly affected. Same for domestic traffic.

Next in this industry like in all transport or travel businesses your product expires at a specific time i.e. when the flight takes off with an empty seat that unit of sale is gone forever. Professionals who come from industries that sell a physical product, do not always understand the huge impact this expiry factor has. Imagine if a tyre manufacturer had to either sell that tyre by mid-night or throw it away and produce a fresh one.

Further this is one industry where external bodies who are not always aligned with your thought and culture control your last mile access to your customer - the airport authorities & the security authorities. To get to your customer you first need landing rights. Some other industries have these restraints too but in airlines it is absolute. And for airlines in India bulk of the costs e.g. lease rentals are in US$ while the bulk of your revenues are in ever depreciating INR.

In India the industry may need some Govt support in the form of bigger working capital facilities from banks but I doubt if any of the big 4 will fold up. Indigo & Vistara are well run. Indigo has deep pockets and Vistara has rich parents. Go Air is not so well managed and tends to be penny wise and pound foolish but I don’t see them going bankrupt. Air India is owned by the GoI. Only Spicejet is skating on thin ice – maybe very thin; but they are close to the Govt I’m told. Air Asia India I cannot say – badly run, mercurial management at HQ in Malaysia, Tata’s and Air Asia do not see eye to eye and so on. Smaller companies like Trujet, Air Deccan, Star Air are at high risk if domestic demand stays below break even longer than two months.

[McLaren Rulez]

Originally Posted by V.Narayan

Airlines is an industry that every self-respecting frequent flyer believes he knows and most certainly has an opinion on.

I'm interested in yours!

Do you believe that both our government and those of other countries ought to be bailing out airlines (and also other industries)? Or is there merit to the viewpoint that such government intervention only encourages poor financial planning and risky behaviour among private corporations?

[johannskaria]

With today’s ban on international flights there goes the lucrative routes

Indigo is cutting salaries across the board

Air India has cut down on allowances and fuel reimbursements to officers

Qatar airways is gonna lay-off staff
Alitalia is getting re-nationalised

Many airlines are asking their staff to go for leave without pay

And this is going to be just the beginning.

[ABHI_1512]

Originally Posted by msdivy

When the airlines were raking in profits, they didn't save for the rainy day. They paid hefty dividends, went for share-buyback (why??), paid a big bonus to their executives.

Now when the crisis has hit the ceiling, they want public money

Absolutely with you on this, not saving for the rainy days and going for expansive buybacks of shares when making profits is what they always do. Now waiting for the bailout is like a double whammy, both for the government as well as the tax payers. In fact , I would say criminal waste of resources if at all a bailout is offered which I am sure is under consideration. Quite a skewed economy we are anyways, it’s another matter that the Pandemic has made things worse for now !

[pganapathy]

Originally Posted by McLaren Rulez

I'm interested in yours!

Do you believe that both our government and those of other countries ought to be bailing out airlines (and also other industries)? Or is there merit to the viewpoint that such government intervention only encourages poor financial planning and risky behaviour among private corporations?

Hands down no government should ever bail out any industry. I don't care how big it is. If it fails, let it die. Yes, it means job losses and a ripple effect to the economy, but governments are better off encouraging good industries to succeed, rather than weak and useless ones. Short term pain for long term gain I say