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Home / Business / Companies / Airlines

Coronavirus: Airline shares plunge, IATA calls for government help

Grant Bradley
By Grant Bradley
Deputy Editor - Business·NZ Herald·
13 Mar, 2020 04:34 AM5 mins to read

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Cathay Pacific has parked up much of its fleet due to coronavirus. Photo / AP

Cathay Pacific has parked up much of its fleet due to coronavirus. Photo / AP

An airline group is calling for urgent government support for the industry following the US Europe ban which has sent airline share prices into free fall.

In what's being descibed as the worst crisis to hit aviation carriers are now laying off staff and parking planes as they battle to survive.

Overnight on Wall Street, United Airlines' share price plunged nearly 25 per cent while Delta was down 21 per cent and American fell 17 per cent. Shares in Boeing fell 18 per cent. Shares in Air France-KLM and Lufthansa, Germany's flagship carrier, both dropped more than 10 per cent.

READ MORE:
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• Horror Malaysia Airlines flight: Ravenous and thirsty passengers get only snack packs

In this country Air New Zealand shares had fallen 14c to $1.62 this afternoon.
They started the year at $3.05.

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The airline this week announced more cuts to its network - bringing them to 10 per cent over the next three months - and is daily assessing how demand is matching capacity that could be cut even further.

New Zealand has a travel ban on foreign visitors from China and Iran and people from Italy and South Korea have to self-isolate for 14 days, effectively making it a travel ban for tourists from those countries. Prime Minister Jacinda Ardern hasn't ruled out border restrictions to Europe which would be a further blow to Air New Zealand which is dealing with more canellations and no-shows from nervous passengers.

Research reveals that one in five New Zealanders have already cancelled or changed travel plans.

The survey of 858 Kiwis by Opinion Compare revealed key concerns and fears Kiwis have about coronavirus, and how it's affecting their life and Auckland Airport today slashed its guidance for the full year by as much as $60 million as passenger numbers plunged by 18 per cent in the first 10 days of March compared to last year.

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The company' chief executive Adrian Littlewood said depending on the duration of the crisis, it might have to defer some infrastructure work among 200 projects under way or planned. The company still intends to outline a decision on the second runway later this year.

The International Air Transport Association called on governments to respond quickly to financial frailty of airlines.

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Airports around the world are close to deserted. Photo / AP
Airports around the world are close to deserted. Photo / AP

''Governments must also recognise that airlines — employing some 2.7 million people — are under extreme financial and operational pressures. They need support," said Alexandre de Juniac, IATA's director general and chief executive.

These calls come in response to the US Government's banning of non-US citizens, and individuals who are not permanent residents of the US, who have been in the 26 Schengen Area states in the past 14 days from entry into the United States.

De Juniac said governments needed to prepare for the adverse economic impact that such measures cause and the impact on the US-Europe market were enormous.

Last year a total of around 200,000 flights were scheduled between the United States and the Schengen Area, equivalent to around 550 flights per day. There were around 46 million passengers (roughly equivalent to 125,000 travelers every day).

"Governments must impose the measures they consider necessary to contain the virus. And they must be fully prepared to provide support to buffer the economic dislocation that this will cause. In normal times, air transport is a catalyst for economic growth and development. Suspending travel on such a broad scale will create negative consequences across the economy. Governments must recognise this and be ready to support," said de Juniac.

Airlines are already struggling with the severe impact that the Covid-19 crisis has had on their business. On March 5, IATA estimated that the crisis could wipe out some US$113 billion ($180b) of revenue.

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That scenario did not include such severe measures as the US and other governments (including Israel, Kuwait, and Spain) have since put in place. The new US measures
will add to this financial pressure. The total value of the US-Schengen market in 2019 was US$20.6 billion.

The markets facing the heaviest impact are US-Germany (US$4 billion), US-France (US$3.5 billion) and US-Italy (US$2.9 billion).

Alexandre de Juniac heads the International Air Transport Association. Photo / Supplied
Alexandre de Juniac heads the International Air Transport Association. Photo / Supplied

"This will create enormous cash-flow pressures for airlines. We have already seen Flybe go under. And this latest blow could push others in the same direction. Airlines will need emergency measures to get through this crisis,'' said de Juniac.

Governments should be looking at all possible means to assist the industry through these "extreme" circumstances. Extending lines of credit, reducing infrastructure costs, lightening the tax burden are all measures that governments will need to explore, he said.

"Air transport is vital, but without a lifeline from governments we will have a sectoral financial crisis piled on top of the public health emergency."

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