Category: Monday Briefing

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 1 June 2020.

Aviation’s June Return

As many countries in Europe are due to lift travel restrictions this month, the UK is determined to remain an outlier.

Its mandatory quarantine regime on passengers arriving in the UK is due to come in to force next Monday, 8 June 2020.

As per the front page lead of today’s Times, it has been widely condemned by the aviation industry as destructive, ill-judged and unenforceable. If the UK government’s “test and trace” contact tracing system is anything to go by, it will not instil confidence.

The Sunday Telegraph reports that the government has recruited the professional services firm KPMG to advise on what mandatory measures should be put in place on passengers departing from the UK. These are reportedly due to be agreed this week.

The Department for Transport is also working on plans for “air bridges” to countries deemed to have a low risk of COVID-19 transmission. These are due to be finalised by 15 June.

Other options under consideration include 20 minute COVID-19 tests on arriving passengers.

Elsewhere, there are small signs that aviation is starting to rebuild.

Austrian Airlines will resume flight operations from Monday 15 June. This will include a daily flight to London Heathrow.

Brussels Airlines will also flight operations from Monday 15 June, with flights to London Heathrow resuming on Monday 22 June.

Further afield, Hong Kong International Airport will begin accepting transit passengers from today.

Virgin Australia Whittles Down Final Bidders

Deloitte, the administrators of Virgin Australia, may announce the two final round bidders for the airline as soon as today.

Bain Capital, BGH Capital, Cyrus Capital and Indigo Partners submitted second round bids last week. Canadian asset manager Brookfield is reported to have entered the bidding process at the 11th hour.

Visions for the airline appear to vary widely with some bidders planing a return to its low cost short-haul roots and others seeking the maintain its ambition to be a full service rival to Qantas.

There appears to be a risk that the airline may fall into liquidation before the bidding process has completed with Deloitte reported to have made an unsuccesful plea to the Australian federal government for emergency funding. (Sydney Morning Herald).

Things have been relatively quiet as far as Virgin Atlantic is concerned. That’s not necessarily a bad sign. A lack of leaks to the press often indicates progress behind the scenes.

Continue reading “London Air Travel’s Monday Briefing – 1 June 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 25 May 2020.

BA’s War Of Words With Trade Unions

A war of words has broken out between BA and its trade unions over planned redundancies and changes to staff terms and conditions.

On Friday, BA CEO Alex Cruz sent a message to staff which was leaked to the Financial Times. According to this, BA is having “productive conversations” with its pilots union BALPA. It is also claimed that representatives from GMB and Unite, who represent cabin crew and ground staff, have not attended any meetings with the airline.

“Consultation is so important, and productive conversations are already being held with Balpa. I am sorry that neither Unite nor GMB have attended any of the daily meetings they are invited to so that they can provide ideas and input into any of the other proposed changes, and maximise the number of jobs saved.”

Unite claims the consultation is a sham and has instead chosen to run a public campaign against the airline accusing it of betrayal.

Taken at face value, this appears to be worrying for BA staff who are caught between the two sides.

The unions’ strongest leverage at the moment is the repeated and on the record comments by IAG CEO Willie Walsh to its investors and MPs that it will engage in a “genuine and meaningful” consultation “with a view to reaching an agreement” in accordance with legislation on labour relations.

History has shown that BA and its trade unions can sometimes, against all expectations and far more often than they are given credit for, achieve a lot behind closed doors.

History has also shown that when there is a mandate for change from the top of the airline stonewalling doesn’t work and change will be imposed. BA will also sit out any negative publicity.

It is possible that this, like previous incidences where BA has imposed change when talks with unions break down, could result in litigation. Whilst there are “optics” and political scrutiny surrounding this, the consultation process BA has initiated is a formal legal one. If this does go to court, it will focus on the adherence of all sides to the legal process and not what IAG would term “the noise”.

Virgin Raises Funds To Support Virgin Atlantic

Virgin Group has raised $366m by selling down part of its stake in Virgin Galactic. It will retain a 40% stake in the space tourism business.

The proceeds will be used to support Virgin branded businesses. There’s been little news on potential new investors in Virgin Atlantic. Meanwhile, according to Sky News, lenders to the airline have appointed the professional services firm Deloitte to advise on their financial exposure to the airline.

On the question of state support for airlines, today’s Financial Times reports that the Chancellor of the Exchequer Rishi Sunak has agreed to a state bailout plan to save, in exceptional circumstances, “strategically important” companies whose failure would “disproportionately harm the economy” and are “viable companies which have exhausted all options” including existing government loan schemes.

This may pave the way for state support for airlines that are unable to qualify for existing government support schemes.

Sir Stelios Presses On

Sir Stelios Haji-Ioannou is undeterred having failed to oust four easyJet directors last Friday.

Sir Stelios has alleged that there were voting irregularities which could have affected the result. He is also pressing on with a campaign to encourage whistle blowers to come forward with information on alleged irregularities in connection with the order for new aircraft from Airbus.

Even if this comes to nothing, it may not be the end of the rancour between Sir Stelios and easyJet.

easyJet licences its brand name from Sir Stelios. Full details are on the easyJet website. The two sides have previously reached an out of court settlement over disputes in relation to the licence. easyJet agreed a new licence agreement in December 2010 for 50 years and a minimum term of ten years, which conveniently expires later this year.

Continue reading “London Air Travel’s Monday Briefing – 25 May 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 18 May 2020.

Aviation Job Losses

It has been a grim week for anyone employed in the aviation industry.

By the end of the year the number of job losses will be counted in the hundreds of thousands. Air Canada alone last week announced it is to cut around 20,000 jobs out of its 38,000 strong workforce.

Closer to home, BA CityFlyer announced plans to make up to 72 of its 248 pilots redundant. Its pilot base in Edinburgh will also close. This is in addition to 12,000 planned redundancies at BA.

IAG CEO Willie Walsh appeared before the Transport Select Committee last week to answer questions about the planned restructuring of BA.

These hearings are almost always unsatisfying. The format of a large number of MPs, with at best varying levels of knowledge, taking turns to ask a question doesn’t work. When a barrister cross-examines a witness in court their first question is never the one they are seeking an answer to. Nor do they ask a question they don’t already know the answer to.

A further hearing is due to take place this Wednesday with evidence from BALPA, the Civil Aviation Authority and Unite.

If you read the transcript of last week’s hearing on potential job losses at BA, Willie Walsh, who is not actually responsible for leading negotiations at BA, makes reference to a “consultation” with elected trade union representatives nearly 50 times. It won’t be known for some weeks how meaningful this is and what proved to be a fait accompli.

Willie Walsh always been dismissive of what he terms “noise”. It is perhaps convenient for him to play the role of “Mr Nasty” in this as he is due to retire in September (much like his restructuring of BA before he left to head up IAG). However, like all major companies, IAG and BA need to be prepared for considerable continued political scrutiny.

Quarantine Confusion

IAG and other UK airlines have criticised plans to introduce a 14 day quarantine regime for passengers arriving in the UK.

Whilst some countries in Europe are beginning to reopen borders, there is no consensus on how a proposed 14 day quarantine period of passengers arriving in the UK will work.

Based on reports in the Sunday papers, there are disagreements between ministers on who should be exempt. One government adviser briefed The Sunday Times that it is a “shit show”. Today’s lead article in The Times suggests that exemptions will be largely limited to lorry drivers.

Speaking to Sky News yesterday, Heathrow CEO John Holland-Kaye has called for flights to restart between the UK and low risk countries.

Heathrow will also deploy thermal imaging technology at Terminal 2 this week to screen arriving passengers, though this not yet part of any official government policy.

Elliott Management Circles Virgin Atlantic

As Virgin Atlantic seeks new investment it is inevitable that names of potential suitors will leak to the press.

Many will come to nothing. However, a report from the Sunday Telegraph that Elliott Management is interested in the airline can’t go unnoticed.

Led by Paul Singer, Elliott Management is the world’s most feared activist investor. It is notorious for taking stakes in companies it considers to be underperforming – recent targets include AT&T and Twitter – publicly documenting at length management failings and demanding significant changes in strategy.

Continue reading “London Air Travel’s Monday Briefing – 18 May 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 11 May 2020.

Private Equity Firms Circle Virgin Atlantic

For an airline known for its PR savvy, Virgin Atlantic is struggling to control the narrative of its refinancing.

The whole process has been beset by leaks.

On Saturday, Sky News reported that the airline has appointed the firm Alvarez & Marsal to prepare for a possible administration process.

A “pre-pack” administration, where a business enters into administration and is immediately sold to a new buyer, is common in many industries. These have not been used by airlines because the Air Operator Certificate is ordinarily suspended on entering administration.

In the case of Virgin, the position is complicated by its Heathrow slots. In 2015, Virgin issued a bond to raise £220m to fund new aircraft. This was secured against Virgin’s Heathrow slots. A new subsidiary airline, Virgin Atlantic International, was formed to operate a small number of flights and take over the slots should Virgin Atlantic collapse. Virgin Atlantic still retains ownership of its Heathrow slots and should it fail to repay the bond, it will forfeit its slots.

The Sunday Times reported that over 100 potential investors have been approached on behalf of Virgin. The Sunday Telegraph claims that there are a dozen or so interested parties. These include Greybull Capital (former owners of Monarch), Apollo Global Management, Centerbridge Partners, Singapore sovereign wealth fund Temasek and Cerberus Capital Management.

Virgin Atlantic CEO Shai Weiss has intimated that state support could take the form of a loan guarantee against third party investment in the airline.

The “optics” surrounding Sir Richard Branson remain. Not for the first time when there is bad news from Virgin Atlantic, he was nowhere to be seen when it announced substantial job cuts last week. The Financial Times has suggested that manoeuvres may be under way for Sir Richard to divest of part of his holding in Virgin Galactic to help recapitalise Virgin Atlantic.

In addition to the immediate retirement of the Boeing 747, Shai Weiss has also confirmed to The Sunday Times that it will defer the delivery of six Airbus A350-1000 aircraft.

BA Prepares To Return In July

IAG CEO Willie Walsh sounded quite relaxed announcing the group’s first quarter results last week.

Perhaps it’s because he is retiring in September, but there was none of the slight hesitation or wobbles of voice of the past when answering questions during far lesser crises.

There were no significant changes to fleets or routes. Dubbing Microsoft Teams and Zoom as “crap”, Willie was confident that business travel will soon return.

Sometimes IAG will know things during results presentations that it is not yet ready to share – the Competitions & Markets Authority announcement on the transatlantic joint-business later in the day is a case in point.

However, they were clearly not expecting Prime Minister Boris Johnson to announce yesterday that a mandatory quarantine will be imposed on passengers arriving into the UK by air. The government has not yet confirmed when this will take effect, nor the time passengers will have to spend in quarantine.

The Transport Select Committee is also taking evidence on the impact of Coronavirus on the transport sector and Willie Walsh will be giving evidence from 10:00 BST this morning. Fans of select committee hearings (where there can be a bit of grandstanding and placement of soundbites by MPs) can watch it on BBC Parliament.

Continue reading “London Air Travel’s Monday Briefing – 11 May 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning Monday 4 May 2020.

The “Future Size and Shape” of British Airways

After the events of 11 September 2001, BA was faced with financial losses, a heavily indebted balance sheet and the rising threat of low cost airlines. Then CEO Rod Eddington assembled a group of senior managers to plan the “future size and shape” of the airline.

Nothing was off the table. BA looked at exiting short-haul altogether and effectively reverting to a BOAC long-haul only model. It also considered closing down at London Gatwick.

What followed set the course of the airline for the rest of the decade.

Many unprofitable routes were cut. Short-haul routes were downgraded from Boeing 757 and 767 to Airbus A320 series aircraft. A long process of removing legacy complexity began.

Whilst BA pulled back from withdrawing from Gatwick altogether, it abandoned a plan to operate Gatwick as a second London hub. Many routes were transferred to Heathrow. The airport was “de-hubbed” with a focus on point-to-point leisure traffic and a vastly reduced and simplified fleet.

A similar exercise is now underway at BA. Though, this time it is being led by its “brand agnostic” parent company IAG.

BA CEO Alex Cruz stunned staff last week by announcing a consultation which may lead to up to 12,000 of the airline’s 40,000 odd employees being made redundant. The airline is also seeking substantial changes to working practices, including the merger of its three Heathrow cabin crew fleets.

BA and State Support

In an e-mail to staff Alex Cruz said “There  is no Government bailout standing by for BA”.

Much will focus in the coming weeks on what is meant by this.

BA has already taken advantage of the UK government’s payroll support scheme for 22,626 furloughed employees.

Iberia and Vueling have secured loans from a consortium of banks for €750 million and €260 million respectively, guaranteed by the Spanish government. These come with relatively limited conditions.

No redundancies have yet been announced at Iberia or Vueling. Aer Lingus is consulting with unions on job cuts of up to 900 of its 4,500 employees.

Questioned are being asked by BA’s employees, trade unions and some politicians why it hasn’t obtained a loan under the UK’s Covid Corporate Financing Facility to mitigate the need for redundancies as easyJet and Wizz Air have done. Some are even calling for the separation of BA from IAG.

IAG will dismiss much of this as “noise” – there were similar sentiments at Iberia when IAG forced through a painful restructuring in 2012.

There is an unquestionably an element of “never waste a crisis” to this. After leaving BA for IAG Willie Walsh has never hidden the fact that his restructuring of the airline was work in progress. BA accepting a state-backed loan would also make it easier for Virgin Atlantic to demand one to preserve competition at Heathrow.

A situation IAG is likely to be at pains to avoid is for governments to grant loans either secured against, or in exchange for, shares in IAG airlines. This Swiss government is to do the former for SWISS. Lufthansa is in negotiations with the German government for a federal bailout of around €10 billion. A government stake of around 20% and a seat on its supervisory board are likely pre-conditions. Fundamental to the model of IAG is it having full control of its airlines and being able to make “rational” investment decisions. Having to assuage individual government shareholders would fatally undermine this model.

IAG is due to give an update to investors and analysts this coming Thursday morning. Whilst IAG always declines to give a running commentary whilst negotiations with trade unions are underway, it should at least give an update on planned capacity for the coming months.

Will BA Leave Gatwick?

Back to BA at Gatwick, will it leave the airport?

Probably not. One consequence of BA’s retreat 20 years ago was that it gave easyJet free rein to go from next to nothing to occupying half of the slots at the airport. Iberia, LEVEL and Vueling do not have anywhere near the brand recognition in the UK to replace BA at Gatwick.

That said, BA did however look at transferring all long-haul flights from Gatwick to London Heathrow a while ago, but could not reach an agreement with the airport on landing fees. With its own slots to fill at Heathrow and potentially lucrative slots from departing airlines to snap up, BA may look at this again.

Continue reading “London Air Travel’s Monday Briefing – 4 May 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 27 April 2020.

Virgin Atlantic Scrambles To Secure Investment

It has been a weekend of claim and counter-claim in respect of Virgin Atlantic.

The Sunday Telegraph reported that Virgin had abandoned any hope of securing government support. It was now racing to secure new private sector investment against a deadline of the end of May.

This was promptly denied by Virgin. It insisted the option of government support remains on the table.

Investment bank Houlihan Lokey has approached over 100 potential investors on behalf of Virgin Atlantic. These are said to include private equity groups, sovereign wealth funds and hedge funds.

More than 50 parties have asked for further information. They have a week to express further interest.

Virgin has also insisted that the airline is not for sale outright. This is not the first time Virgin has explored a sale. Deutsche Bank were commissioned to carry out a “strategic review” in 2010. Although Sir Richard has always maintained he would never sell the airline. “I wouldn’t ever sell my shares as it’s too much my baby” he said in 2012.

It is plausible that Virgin will be able to obtain some new finance. This will not come from Delta which has confirmed it can’t support the airline. It has also reportedly applied for a business interruption loan.

There remains considerable public hostility, at least online, to state support for Virgin Atlantic.

Much of this has focused on Sir Richard Branson’s tax status and his residence in Necker Island. In truth, Sir Richard has long used tax minimisation measures. As have some of Virgin’s competitors, but not as transparently as living on a private island in the Caribbean. In more buoyant economic times most, apart from Private Eye magazine and the author Tom Bower, have been willing to turn a blind eye to it.

Not only does this show a remarkable fall in Sir Richard Branson’s pubic persona, but also his lack of political access. It’s a far cry from Cherie Blair was reported to have uttered “We must do something for you” to Sir Richard at a Downing Street reception.

IAG has been relatively quiet over the past couple of weeks. Whilst the personal animosity between Sir Richard and Willie Walsh is well known, it’s worth remembering that the Competition & Markets Authority is still reviewing BA’s joint business with American Airlines. The failure of Virgin Atlantic could mean they are forced to end it.

London Airport Operations

In terms of London airport operations and route developments:

Air New Zealand has permanently suspended London Heathrow – Los Angeles. The route was due to end in October 2020, and its temporary suspension is now permanent.

Delta has temporarily suspended routes from London Heathrow to Portland and Salt Lake City for the summer season.

United Airlines has temporarily suspended routes from London Heathrow to Denver, Houston and Los Angeles for the summer season.

Heathrow airport has confirmed that Terminal 3 has closed to passenger flights. All airlines have temporarily relocated to Terminal 2. The remaining airport moves from Terminal 4 such as Air France, Alitalia and KLM are expected to be complete in early May.

On the question of temperature checks on arriving passengers, Heathrow insists that it is bound by UK Government rules on passenger checks. Should Government policy change, Heathrow says it can move quickly.

Continue reading “London Air Travel’s Monday Briefing – 27 April 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 20 April 2020.

With the UK’s lockdown set to continue for at least another three weeks and there being absolutely no sign of international air travel restrictions being lifted, this is little for airports and airlines to do than simply wait.

Here’s a précis of the latest operational news for airlines in the UK:

Today, Beijing Capital Airlines, Finnair, Qantas and Qatar Airways will transfer operations to London Heathrow Terminal 2. They follow Cathay Pacific, Emirates Iran Air, Japan Airlines and Pakistan International Airlines who have also moved to Terminal 2.

British Airways has extended the cancellation of all flights at London City and London Gatwick until Friday 22 May 2020 at the earliest. In all likelihood, this will be extended further.

easyJet has no firm plans to resume scheduled flights and is likely to give at least two weeks’ notice before doing so.

As if the airline didn’t have enough to contend with, its implacable founder Stelios Haji-Ioannou is now seeking to oust the airline’s Chairman John Barton and Chief Executive Johan Lundgren. This is due to the ongoing dispute over an order for Airbus aircraft.

Loganair has confirmed that it is in discussions with the Department for Transport on a state support package. In contrast to Virgin Atlantic, the Treasury does not appear to be leading negotiations.

On Friday evening, comments were “leaked” to the Financial Times that the Treasury was “unimpressed” with Virgin Atlantic’s initial bid for £500m of state support.

Specifically, the Treasury had concerns that Virgin had not done enough to secure additional funding from the private sector. It had not also considered in its 2-5 year business plan reduced demand for air travel.

As anyone who has seen the Treasury at work will know, it is not surprising to seek details of discussions leak and for the Treasury to be seen to calling the shots.

One question Virgin will have to answer is what competitive role it will play in the marketplace over the next few years. Its plan to be a “Second Flag Carrier” is increasingly implausible – Virgin has already suspended London Heathrow – Sao Paulo before launch.

Norwegian has reportedly not paid the April salaries of UK crews who operate for Norwegian Air UK. This is due to the fact that they agency responsible for their employment has not received sufficient funds from Norwegian.

This week the UK Government will operate 31 charter flights from Bangladesh, India and Pakistan to enable British nationals to return home. Full details of these are available from the Foreign Office.

Continue reading “London Air Travel’s Monday Briefing – 20 April 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 13 April 2020.

This should have been one of the busiest travel weekends of the year.

Today, at London Heathrow, excluding cargo only and charter flights, BA will operate just 3 UK domestic, 7 short-haul and 4 transatlantic flights. There are around 35 flights from 23 other airlines over a period of around 12 hours.

There’s no shortage of think-pieces on what the long term impact of COVID-19 will be. The honest answer is that nobody knows.

Lufthansa is one of the first airlines to announce firm fleet reduction plans.

It will retire 6 out of 14 Airbus A380 aircraft, 7 out of 17 Airbus A340-600 aircraft, 3 out of 17 Airbus A340-300 aircraft and 5 out of 13 Boeing 747-400 aircraft. Short-haul aircraft will also be reduced.

Other Lufthansa Group airlines will also reduce their fleets. Lufthansa expect demand to remain subdued into 2021 and will not recover to 2019 levels until 2023.

This is, perhaps, not quite as dramatic as it first sounds. These aircraft were due to be retired in any event. Lufthansa has not yet said anything about deferring deliveries of new long-haul aircraft, of which the group has nearly 70 on order.

Norwegian has, unsurprisingly, delayed its plan to restart flights at Gatwick until 1 June 2020.

Norwegian is also pursuing another financial restructuring which involves a debt-for-equity swap. This is in order to secure further financial support of up to NOK270 million (~£21 million) from the Norwegian Government. The official announcement alludes to a “new Norwegian” which suggests further changes are forthcoming.

The first weekly Qantas service from Melbourne, via Perth, arrived at London Heathrow this morning.

Only economy tickets are on sale with many seats in the economy cabin blocked off. Though looking at seat maps some premium economy seats seem open for selection. Flights operate with limited food and beverage and no in-flight entertainment. The return to Perth will depart London Heathrow on Wednesday morning.

On a related note, this is a good primer from Qantas on what is involved in preparing aircraft for storage.

Continue reading “London Air Travel’s Monday Briefing – 13 April 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 6 April 2020.

As scheduled air travel all but grinds to halt, the UK Government is now enlisting airlines to operate charter flights to bring British nations back home.

The first charter flights from India were announced yesterday and registration for these flights is now open. Special charter flights will operate from Goa, Mumbai and New Delhi this week. More details are available from the British High Commission India.

Repatriation flights will also operate from Cape Town and Johannesburg this week.

In terms of scheduled airline operations:

Heathrow confirmed last week that it intends to temporarily close Terminals 3 and 4, with flights consolidated in Terminals 2 and 5. However, the airport is yet to confirm which airlines are moving where. Heathrow will also begin single runway operations from today.

International Airlines Group also confirmed that its airlines will continue to reduce capacity by 90% up until the end of May. Though, BA has not yet processed any substantial cancellations from 1 May 2020.

American Airlines has set out tentative plans to reinstate its network from London Heathrow, which is currently limited to Dallas / Fort Worth. American plans to resume flights to London Heathrow from Chicago O’Hare, Los Angeles, New York JFK, Philadelphia and Raleigh-Durham on 4 June 2020. Charlotte will resume on 7 July. Phoenix will resume on 7 October. American’s inaugural flight from Boston to London Heathrow is delayed until 25 October.

Virgin Atlantic & Virgin Australia Seek State Support

Virgin Atlantic and Virgin Australia, the last two Virgin branded airlines in existence, are both actively seeking state support.

Virgin Australia has formally asked the Australian Federal Government for support of AU$1.4 billion.

Virgin Atlantic is reported to be in talks for UK Government support of £500m which would include loans to cover operating expenses and credit guarantees to prevent credit card companies.

There are parallels in both requests in that there is a history of corporate and personal animosity between both Virgin airlines and their main incumbent competitors.

Virgin Australia’s request prompted a response from Qantas that should Virgin’s request be authorised (there are no signs yet that it will), Qantas should receive a proportionally larger bail out to “level the playing field”. Qantas CEO Alan Joyce has also given warning against state support for businesses that have been “badly managed”.

According to ABC Australia Credit Suisse has estimated that Virgin Australia could burn through its remaining cash reserves by the end of June.

The Sunday Times estimates that Virgin Atlantic is burning approximately £20 million of cash a week. IAG’s reported cash balance fell from €7.35 billion to €7.2 billion between 12 and 27 March.

There are appears to be no prospect of any of Virgin Australia’s shareholders which include Etihad and Singapore Airlines, contributing to a recapitalisation of the airline. In the UK there is an expectation that Virgin Atlantic’s shareholders, Delta and Virgin Group, should foot the bill.

At a UK Government press conference yesterday, Health Secretary Matt Hancock declined to answer a question from Jim Pickard of the Financial Times as to whether Virgin Atlantic should receive a bailout because its majority shareholder is not tax resident in the UK and has previously sued the National Health Service.

Whatever the economic and competitive merits of state support for Virgin Atlantic, “optics” and politics are unavoidable. The Treasury will, as it always does in Government, call the shots. Virgin Group will have to be seen to pay a price.

Continue reading “London Air Travel’s Monday Briefing – 6 April 2020”

London Air Travel » Monday Briefing

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.

Continue reading “London Air Travel’s Monday Briefing – 30 March 2020”