$85b rescue package unlikely to prop up troubled airlines

Bloomberg

Governments have devoted more than $85 billion to propping up airlines after the coronavirus pandemic wiped out travel demand and grounded jetliner fleets. But with job cuts racking up, a debate is raging over whether opening the spigot will do more than merely delay the inevitable.
Global air traffic may only get back to 50% to 60% of usual levels by year-end, leading the International Air Transport Association (IATA) to suggest the recovery will be a tortuous one. Given the financial impact and safety measures likely to be required, it could be three years before the industry sees a sustainable revival, according to Delta Air Lines Inc. Chief Executive Officer Ed Bastian. Billionaire Warren Buffett, who had been the industry’s most prominent investor, isn’t waiting around. His Berkshire Hathaway Inc. exited its stakes in Delta and the three other big US airlines.
Tension is also mounting over whether the cash windfall will interrupt a necessary thinning out of the sector by propping up weaker airlines, many state-owned or former flag carriers, while their leaner rivals rely on their own resources. Some otherwise-unviable routes would be lost without aid, along with jet orders
that would help satisfy the carbon-reduction goals of state backers.
Ryanair Holdings Plc CEO Michael O’Leary has challenged the notion of state aid as inherently unfair and detrimental to pricing power for those carriers still standing on their own feet. British Airways owner IAG SA has accessed government-guaranteed loans in the U.K. and in Spain. Still, airlines that are unwilling or unable to reform shouldn’t get “free money’’ from the government, says CEO Willie Walsh.
Air France-KLM is set to get state aid of as much as 11 billion euros ($12 billion) from the French and Dutch governments. KLM plans to cut up to 2,000 posts and has taken advantage of furlough programs. Air France is discussing layoffs with unions.
Italian carrier Alitalia is being is being nationalised, with the government set to take full control in June. The airline has already more than 2.1 billion euros since entering administration in 2017.
Alitalia and its unions agreed on a temporary layoff plan for 6,622 workers through the end of October. Italy’s industry minister was upbeat last month, saying the virus means Alitalia will now be in the same spot as other airlines.
American Airlines, the biggest US carrier, has secured $5.8 billion in state aid dedicated to payroll support and is negotiating terms for a separate $4.75 billion federal loan.
About 39,000 workers at the airline have voluntarily taken time off, reduced hours or early retirement. American is evaluating whether it will have to lay off any of its nearly 130,000 workers.