Airlines across the world are reeling from the shutdown of economies caused by governments’ actions in trying to stop the spread of the coronavirus which is in 184 countries.
Travel bans and nationwide lockdowns have brought global aviation almost to a standstill, forcing airlines to ground planes whilst placing workers on unpaid leave. The International Air Transport Association has forecast airline passenger revenues will be cut in half this year, falling by US$314 billion from 2019. The industry employs about 25 million people globally.
Lufthansa, one of Europe’s biggest airline groups, is permanently reducing the size of its fleet and shutting down one of its low-cost carriers, warning that the aviation sector will take years to recover from the coronavirus pandemic.
President Donald Trump has handed US airlines nearly US$50 billion in aid, split between payroll protection and loans. It will be needed with United Airlines reporting a US$2.1 billion first quarter loss on Monday (local time), with it warning the second quarter will be worse. Other US airlines are due to issue first quarter earnings reports this week.
The 86-year-old national carrier South African Airways plans to lay off its entire 4,700-strong workforce at the end of the month. South African Airways last made a profit in 2011 and was put into a form of bankruptcy protection in December before the coronavirus spread outside China.
Sir Richard Branson said on Monday (local time) Virgin Atlantic and Virgin Australia will die unless they receive financial support from both governments.
“Over the five decades I have been in business, this is the most challenging time we have ever faced. It is hard to find the words to convey what a devastating impact this pandemic continues to have on so many communities, businesses and people around the world. From a business perspective, the damage to many is unprecedented and the length of the disruption remains worryingly unknown,” wrote Branson, in an open letter to Virgin employees.
“Together with our Virgin company teams, I am working day and night to look after our people and protect as many jobs as possible. We are operating in many of the hardest hit sectors, including aviation, leisure, hotels and cruises, and we have more than 70,000 people in 35 countries working in Virgin companies. We’re doing all we can to keep those businesses afloat and I am so thankful to all of you who have continued to work so hard in these difficult times. We have already committed a quarter of a billion dollars to help our businesses and protect jobs, and will continue to invest all we can.”
Branson wrote that Virgin Atlantic needs a commercial loan from Boris Johnson’s government, similar to the UK£600m loan his government recently gave EasyJet, even offering his home, Necker Island, in the British Virgin Islands, in the negotiations.
“The reality of this unprecedented crisis is that many airlines around the world need government support and many have already received it. Without it there won’t be any competition left and hundreds of thousands more jobs will be lost, along with critical connectivity and huge economic value. Virgin Atlantic started with one plane 36 years ago. Over those years it has created real competition for British Airways, which must remain fierce for the benefit of our wonderful customers and the public at large,” said Sir Richard.
Virgin Australia is owned by Etihad Airways (20.94%) Singapore Airlines (20.09%) Nanshan Group (19.98%) HNA Group (19.82%) and Virgin Group (10.42%). Scott Morrison’s government has refused to offer any further financial assistance and rejected providing $1.4 billion in assistance leaving Virgin Australia to enter voluntary administration, administered by Deloitte. Virgin Australia, which employs 15,000 workers, is carrying about A$5 billion in debt and its cash flow has collapsed due to the coronavirus pandemic.
In a statement to the Australian Stock Exchange on Tuesday morning (local time), Virgin Australia said the decision was made to “recapitalise the business and help ensure it emerges in a stronger financial position on the other side of the COVID-19 crisis”.
“The decision comes as the Group has continued to seek financial assistance from a number of parties, including state and federal governments, to help it through the unprecedented crisis, however it is yet to secure the required support,” the statement said.
“Virgin Australia will continue to operate its scheduled international and domestic flights which are helping to transport essential workers, maintain important freight corridors, and return Australians home.”