Airlines need up to $200b to survive virus, says IATA

Bloomberg

The global airline industry needs government aid and bailout measures totalling between $150 billion and $200 billion if it’s to survive the coronavirus crisis, according to the International Air Transport Association (IATA).
Even then, the pandemic is likely to reshape the industry, with many airlines failing, others consolidating and entirely new groupings emerging, IATA Chief Executive Officer Alexandre de Juniac said in a webcast briefing.
The warning came as governments around the world indicated that they’re actively exploring proposals to save airlines, with Italy’s plans to re-nationalise Alitalia among the most advanced. Airbus SE and Boeing Co are also in talks about state support, with the European company announcing a temporary shutdown to comply with tighter hygiene requirements.
IATA, which represents 290 airlines around the world, said a March 5 estimate suggesting carriers will lose $113 billion in revenue this year is already outdated. It didn’t take into account the border closures and flight bans that have been enforced around the world as the virus has spread.
At the same time, De Juniac said he was “pretty satisfied” with the response of governments to the industry’s pleas for help. He praised state intervention in support of airlines in Singapore, South Korea and China, and said packages being put together in the US, UK and European Union appear positive.
“We are pushing hard,” he said on the call. “Governments are listening.”

Liquidity Squeeze
IATA Chief Economist Brian Pearce said only about 30 airlines worldwide have reasonably healthy debt and earnings. And even the stronger carriers probably have only enough cash to survive for a matter of months without some sort of aid, making bankruptcy a real near-term risk, he added.
Airlines require a variety of measures, ranging from fully fledged bailouts through loans, loan guarantees, bond-market support and tax breaks, De Juniac said. Even once the crisis has past, carriers will remain weak and governments will have to reduce the general burden on the sector, he said.
Credit rating companies have started to take action on European airlines.
Deutsche Lufthansa AG sank into non-investment-grade territory after a one-step downgrade by Moody’s. Its bonds due in 2024 fell 10 cents on the euro to 78 cents, according to data compiled by Bloomberg.
Moody’s also cut the rating of Easyjet Plc to two steps above junk and is reviewing British Airways and its parent IAG SA.
Scandinavia’s main airline SAS will get a total of $300 million in state guarantees from Sweden and Denmark, in support Danish Finance Minister Nicolai Wammen described as a first step.
The IATA’s estimate of global bailout requirements comes after the Airlines for America trade group said that US carriers will need $58 billion in aid.
Italy included 600 million euros ($658 million) of funding to Alitalia in a proposed coronavirus stimulus package as part of a plan to re-nationalise the loss-making carrier. Alitalia had been in bankruptcy protection even before the outbreak and had already cost taxpayers more than 2.1 billion euros.