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Welcome to London Air Travel’s Monday Briefing for the week beginning 23 March 2020.
“We have no incoming bookings any more, hardly any.”
Carsten Sphor, Chief Executive, Lufthansa
At the time of a global crisis, it’s easy to catastrophise. Many in the immediate aftermath of 11 September 2001 thought aviation would never recover. However, the situation with Coronavirus is moving so quickly that the plans of airlines just seven days ago now seem hopelessly optimistic.
On both sides of the Atlantic, Governments are contemplating state support for airlines.
In the US, airlines have acted in concert and issued a plea for support of up to $60 billion. This includes payroll grants and loan guarantees. At the time of “going to press” a bill is unsurprisingly caught up in political wrangling between Democrat & Republican politicians.
In the UK, there is no consensus amongst the industry on what the Government should do.
The Government has appointed Rothschild to look at measures to support the industry. Some measures reportedly include a moratorium on EC261 compensation, waiving Air Traffic Control charges and temporarily suspending Air Passenger Duty.
Some reports have suggested that measures such as loan guarantees will not be enough and the Government will have to take an equity stake in UK airlines.
Last week, Virgin Atlantic issued an outright request for Government credit facilities of up to £7.5 billion for the industry. Virgin is clearly nervous that credit card providers will hold back funds as they have done to Flybe and Norwegian.
Yesterday, Sir Richard Branson also committed $250m of funds to his Virgin businesses which have all been impacted by Coronavirus (Virgin).
IAG has been keen to emphasise its resilience with cash of €7.35 billion and undrawn facilities of €1.9 billion. This may sound like a lot of money but UBS estimated last week that IAG could burn through €1.15 billion of cash a month.
A “senior IAG source” also briefed BBC News last week that there are better uses of taxpayer funds than a bailout for Virgin Atlantic.
(It’s also worth recalling there is a lot of history between Sir Richard Branson and Willie Walsh from the last financial crisis. When BA was reeling from the collapse of Lehman Brothers, in very public fashion due its status as a listed company, Sir Richard raised the question of the need for state support of BA. This triggered a fall in BA’s share price, and Sir Richard said of BA that “we should wait for its demise.”)
There are of course inherent conflicts in the Government taking equity stakes in different UK airlines where it would effectively have competing financial investments.
IAG has long been against Government investment in airlines and is likely to only accept an equity stake as an absolute last resort. The UK Government would only have interest in investing in BA. Ditto for the Spanish Government and Iberia. IAG has always wanted full control of all its airlines and is unlikely to be willing to cede minority interests in any of its subsidiaries, not least when there’s the potential for political interference.
Impact Of Coronavirus On UK Airlines & Airports
In terms of the operational impact of Coronavirus in the UK:
Manchester Airport is to consolidate operations at Terminal 1 from Wednesday 25 March. All flights originally scheduled to arrive at / depart from Terminals 2 and 3 will do so at Terminal 1.
Whilst there has been no official confirmation from London Heathrow, it has intimated that it shrink its operations, which suggests some terminals will be closed. BA will also temporarily transfer all flights from Heathrow Terminal 3 to Terminal 5 from Sunday 29 March.
London Gatwick is also taking temporary measures to reduce its “operational footprint” such as closing to scheduled night flights.
BA has also temporarily suspended operations at London City airport until Saturday 4 April 2020. Given a number of other airlines at London City such as Air Antwerp and Luxair are temporarily suspending operations, it’s hard not to envisage the airport closing entirely.
Impact Of Coronavirus On International Airlines
And the operational impact of Coronavirus on international airlines:
Air New Zealand has closed its UK cabin crew base, seven months earlier than planned ahead of the formal suspension of Heathrow – Los Angeles – Auckland at the end of October. The route is temporarily suspended until 30 June.
Cathay Pacific is to cut passenger capacity by 96% in April and May. Cathay will operate three flights a week to 12 destinations, including London Heathrow.
Emirates is to temporarily suspend almost all passenger flights from Wednesday 25 March. However, some links to the UK and other countries will be maintained.
Lufthansa Group airlines Austrian Airlines and Brussels Airlines have temporarily suspended operations entirely.
Qantas is to suspend all international flights from late March to Sunday 31 May 2020. All Qantas Airbus A380, Boeing 747 and 787-9 aircraft will be grounded.
South African Airways has suspended all regional and international flights until 31 May 2020.
Late post publication updates:
[Reserved for updates throughout the day]
KLM has published its planned schedule for 29 March to 3 May. The airline plans to operate 69 return flights to 25 intercontinental destinations. Most destinations will have 2-3 return flights a week. Only New York will be served daily. Some flights will operate with cargo only initially due to travel restrictions. All flights will be operated with Boeing 787 & 777 aircraft as the Boeing 747 will be retired. KLM will also serve 32 destinations in Europe including London City and Heathrow. Full details are available at KLM.
Singapore Airlines plans to reduce capacity by 96% up to the end of April. 138 of 147 Singapore Airlines and SilkAir aircraft will be grounded. 47 of 49 Scoot aircraft will be grounded. The group is exploring a number of measures to improve liquidity such as deferring the delivery of new aircraft and securing new funding from banks. Full details of cancellations, which include an extremely limited service between London and Singapore, are available at Singapore Airlines.
Virgin Atlantic is to transfer what few remaining flights operate from London Gatwick to London Heathrow from Tuesday 24 March.
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