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Welcome to London Air Travel’s Monday Briefing for the week beginning 30 March 2020.
Cash Is King
With airlines now facing a minimum of six months’ disruption, their overwhelming priority is the preservation and raising of additional cash.
Some airlines have already taken steps to raise additional capital:
Norwegian has completed the first step to meet the criteria to obtain a loan guarantee of NOK300 million (~£23 million) from the Norwegian Government by securing a contribution of 10% from financial institutions. Up to NOK3 billion (~£230 million) is available to Norwegian in loan guarantees. However, the criterion for these is considerably more stringent.
Qantas has raised AU$1.05 billion (~£507 million) in additional liquidity, secured against 7 Boeing 787-9 aircraft.
Qatar Airways has warned that it only has enough cash to sustain operations for a “very short period” and “We will surely go to our government eventually.” (Reuters)
Singapore Airlines plans to raise S$5.3 billion (~£3 billion) in new equity from its shareholders and up to S$9.7 billion (~£9.7 billion) through Mandatory Convertible Bonds, which will be progressively raised in the coming months.
Tui has secured an €1.8 billion loan from the German Government.
Virgin Atlantic is reported to be close to formally asking the UK Government for a package of loans and guarantees in the sum of hundreds of millions pounds.
Last week in a letter to airlines, no doubt written in the knowledge it would enter the public domain, the Government said it would not introduce sector specific measures to support the aviation industry. This does not preclude Government support. However, airlines are expected to pursue all available means from lenders and shareholders first.
In the case of Virgin Atlantic, this inevitably places focus on Sir Richard Branson. Additional support from Delta, a 49% shareholder is unlikely, given it has reached its maximum shareholding and it and other US airlines are receiving direct financial support from the US Government.
Operational Updates
Airport Coordination Ltd, which oversees the allocation of slots at London airports, has granted an extended waiver of “use it lose it” rules until the end of October 2020. It had, just two weeks ago, granted a waiver until 30 June 2020. This was originally due to be reviewed in May.
The Civil Aviation Authority has published traffic data for domestic and international routes for February 2020. Unsurprisingly, traffic on routes between Heathrow and mainland China fell by 70-100%. Traffic between Heathrow and Hong Kong fell by 40%.
Gatwick Airport is to close the North Terminal from Wednesday 1 April 2020. All remaining flights will operate from the South Terminal. The airport’s sole runway will also only be operational for scheduled flights between 14:00 and 22:00. Virgin Atlantic has already transferred what few flights remain operating to London Heathrow.
London City Airport has closed for scheduled flights until the end of April earliest. BA has temporarily transferred its route to the Isle of Man (operated by Loganair) to London Heathrow.
Finnair has confirmed it will continue to operate a skeleton schedule until 30 June at the earliest. This will include two flights a day between London Heathrow and Helsinki, operated with an Airbus 319 aircraft. Finnair’s sole intercontinental route will be Tokyo Haneda. Full details are available from Finnair.
KLM will, until 3 May, serve 25 intercontinental destinations and 32 destinations in Europe with 69 return flights a week. This represents a capacity cut of around 90%. Most intercontinental destinations will have 2-3 flights a week, with only New York JFK being served with a daily flight.
Also of note this week:
Inside American Airlines‘ scramble to combat in the impact of Coronavirus. (New York Times)
A classic tale of alleged corporate skullduggery by a legacy airline against relatively young upstart: Virgin Australia accuses Qantas of spreading false rumours about its financial health. (Sydney Morning Herald)
Also, from the same publication, what the precarious position of Virgin Australia means for Australian aviation. (Sydney Morning Herald)
Late post publication updates:
[Reserved for updates throughout the day]
easyJet has confirmed its entire fleet of aircraft is grounded for the foreseeable future.
The founder of the easyJet, Sir Stelios Haji-Ioannou, has reportedly written to the airline to demand that it cancels an order for 107 short-haul aircraft from Airbus. Sir Stelios, who owns around a third of the airline, has threatened to call a series of Extraordinary General Meetings to oust easyJet’s non-Executive Directors. (Sky News)
British Airways has, since Saturday 28 March, temporarily transferred flights at New York JFK from Terminal 7 to Terminal 8. BA is due to move to the terminal permanently from 2022. All BA lounges worldwide are now closed.
British Airways has secured additional liquidity by extending an existing revolving credit facility of $1.38 billion from 23 June 2020 to 23 June 2021. At 27 March, IAG has cash of €7.2 billion (€7.35 billion at 12 March) and undrawn credit facilities of €2.1 billion.
IAG has published the following statement:
International Airlines Group (IAG) announces that British Airways has extended its US dollar secured Revolving Credit Facility for one year from 23 June 2020 to 23 June 2021. The amount available under the extended facility is $1.38 billion. Including the extended facility and some smaller additional facilities recently arranged, IAG has total undrawn general and committed aircraft financing facilities equivalent to €2.1 billion currently, compared to €1.9 billion at the end of 2019. IAG has not drawn down on any of its facilities.
IAG continues to have strong liquidity with cash, cash equivalents and interest-bearing deposits of €7.2 billion as at 27 March. Total cash and undrawn facilities are currently €9.3 billion.
In addition, the Group is exploring a number of operational and treasury initiatives to improve further its cash flow and liquidity and will update the market in due course.
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