The coronavirus crisis for airlines has worsened since this photo was taken in Wuhan in late January. Photo / AP
The coronavirus crisis for airlines has worsened since this photo was taken in Wuhan in late January. Photo / AP
Airlines are appealing to regulators around the world to relax the rules around airport slots as they battle with the impact from coronavirus which is forcing them to ground planes and slash executive pay.
The International Air Transport Association (IATA) is contacting aviation regulators to request that the rules governinguse of airport slots be suspended immediately due to the impact of Covid-19.
About 43 per cent of all passengers depart from over 200 slot co-ordinated airports worldwide, including at Auckland, Wellington and Christchurch.
Although doctors say transmission of the virus on planes is unlikely, demand has collapsed in many markets. The association has provided examples of what the collapse in demand means:
The number of people who have contracted Covid-19 stands at close to 91,000 although nearly 48,000 of those had recovered, according to figures compiled by Johns Hopkins University. The virus has claimed 3117 lives, mainly in China but now at a faster rate in other countries.
Singapore Airlines is implementing pay cuts of up to 15 per cent for its senior executives and Thai Airways has slashed pay for its top bosses by up to 25 per cent.
Airline share prices have plunged in the past month after starting their decline in January as the coronavirus in China started spreading.
Air New Zealand says its full-year profit could be hit by as much as $75m and its shares hit a low of $2.09 on Monday but recovered to $2.22 yesterday afternoon. So far this year the airline has lost close to $1 billion of market value.
Cathay Pacific planes have been parked up at Hong Kong Airport. Photo / AP
Virgin Australia was downgraded by S&P Global Ratings last Friday and its share price hit a low of A10c on Monday before recovering 1c and Qantas shares have slumped from A$7.16 to $5.28 since the beginning of the year.
Air New Zealand, which last May announced a pay freeze for its senior executives, would not comment on whether it was considering pay cuts. It has said it has plans to ask some staff if they want to take unpaid leave.
Cathay Pacific has grounded about half of its 150-strong fleet and is asking all its staff to take leave without pay, as has Singapore Airlines. Lufthansa has grounded 25 of its planes.
An Iata forecast of a $44 billion hit to Asia-Pacific airlines' revenue for the rest of the year has already been described by some analysts as likely to be an underestimate.
The association says rules for slot allocation mean that airlines must operate at least 80 per cent of their allocated slots under "normal circumstances". Failure to comply with this means the airline loses its right to the slot the next equivalent season.
In exceptional circumstances, regulators can relax this requirement.
Given these extraordinary circumstances as a result of the public health emergency, the collective view of the airline industry is that the application of the 80 per cent rule during the upcoming season is inappropriate. Flexibility was needed for airlines to adjust their schedules according to "extraordinary" demand developments.
Regulators have already been waiving the slot rules on a rolling basis during the Covid-19 crisis primarily for operations to China and Hong Kong. However, given the recent further outbreaks this is no longer contained to the Asia markets.
Without certainty that these waivers will continue for the northern summer season (or winter season in the Southern Hemisphere), airlines are unable to plan ahead sufficiently to ensure efficient rostering of crew or deployment of aircraft.
Alexandre de Juniac, head of the International Air Transport Association. Photo / Suppiled
Suspending the requirement for the northern summer season to October will mean that airlines can respond to market conditions with appropriate capacity levels, avoiding any need to run empty services in order to maintain slots.
Aircraft can be reallocated to other routes or parked, crew can have certainty on their schedules.
Iata research has shown that traffic has collapsed on key Asian routes and that this is rippling throughout the air transport network globally, even between countries without major outbreaks of Covid-19.
The association's director-general, Alexandre de Juniac, said there were precedents for previous suspension of the slot use rules and he believed the circumstances again call for a suspension to be granted.
"We are calling for regulators worldwide to help the industry plan for today's emergency, and the future recovery of the network, by suspending the slot use rules on a temporary basis.
"The world is facing a huge challenge to prevent the spread of Covid-19 while enabling the global economy to continue functioning. Airlines are on the front line of that challenge and it's essential that the regulatory community work with us to ensure airlines are able to operate in the most sustainable manner, both economically and environmentally, to alleviate the worst impacts of the crisis."
