Global Airline Update

Global Airline Update

Austrian Airlines said Thursday that it would resume flights from June 15 after almost three months of being grounded due to the new coronavirus pandemic, which has heavily restricted international travel.

Flights will resume to destinations in Europe, including London, Paris and Brussels, as well as Tel Aviv from June 15, the carrier, a subsidiary of the German giant Lufthansa, said in a statement.

More cities, including in Austria, will be added from June 22 bringing the total number of destinations up to 37, it said.

The airlines said the flights, mostly serviced by smaller planes such as the Embraer 195 and Dash 8, represented about five percent of the capacity offered during the same period last year.

The carrier said it was considering adding long-distance flights in July depending on demand for short- and medium distance flights.

Passengers will have to wear masks covering their mouths and noses, the airlines added.

The carrier is currently in negotiations with Austria’s government for state aid.

Initially it demanded 767 million euros ($844 million), but recent media reports suggested the amount could have gone down after the airline’s employees accepted pay cuts.

Politicians from the Green party, the junior partner in conservative Chancellor Sebastian Kurz’s government, have said that any state aid should be tied to policies to combat climate change.

Suggestions for what that could mean in practice have included slashing the number of short distance flights and using alternative fuels.

Coronavirus-stricken airline group Lufthansa wavered Wednesday on grabbing a nine-billion-euro German state lifeline, throwing up new turbulence for a rescue that could decide the fate of the historic company.

British no-frills airline EasyJet said Thursday that it will axe up to 4,500 jobs, or almost a third of its workforce, as coronavirus ravages demand and grounds global air travel.

“We are planning to reduce the size of our fleet and to optimise the network and our bases. As a result, we anticipate reducing staff numbers by up to 30 percent across the business and we will continue to remove cost and non-critical expenditure at every level,” said Chief Executive Johan Lundgren in a statement.

The job cuts will impact up to 4,500 of the carrier’s 15,000 staff, a spokesman told AFP. A consultation process will be launched in the coming days.

The COVID-19 outbreak has devastated the global aviation sector, with passenger numbers slumping during lockdown measures as air travel demand evaporates.

EasyJet follows competitors British Airways, Ryanair and Virgin Atlantic, which have all slashed staff numbers to save costs.

“We realise that these are very difficult times and we are having to consider very difficult decisions which will impact our people, but we want to protect as many jobs as we can for the long-term,” added Lundgren.

“We remain focused on doing what is right for the company and its long-term health and success, following the swift action we have taken over the last three months to meet the challenges of the virus.”

EasyJet had grounded its entire fleet at the end of March, and currently plans to resume to the skies in mid-June with a limited number of flights.

“Although we will restart flying on 15 June, we expect demand to build slowly, only returning to 2019 levels in about three years’ time,” added Lundgren.

“We want to ensure that we emerge from the pandemic an even more competitive business than before, so that EasyJet can thrive in the future.”

Travellers arriving in Britain will meanwhile face 14 days in quarantine from next month to prevent a second coronavirus outbreak.

The pandemic has battered the air transport sector by all but grounding planes, resulting in layoffs, bankruptcies and rescue plans worldwide — although Lufthansa is wavering over a nine-billion-euro ($9.9 billion) German state lifeline.

The International Air Transport Association (IATA) forecast this week that global airlines will lose some $314 billion (286 billion euros) in 2020 revenues on the back of coronavirus.

EasyJet added Thursday that it would not provide any outlook as a result of the turmoil.

“At this stage, given the level of continued uncertainty, it is not possible to provide financial guidance for the remainder of the 2020 financial year.

“However, as shown in this release, we continue to take every step necessary to reduce cost, conserve cash burn, enhance liquidity, protect the business and ensure it is best positioned on our return to flying.”

Norwegian Air Shuttle said on Thursday it was now in “hibernation”, hoping to ride out the devastation inflicted on aviation by the coronavirus pandemic which pushed the low-cost carrier deeper into loss.

Norwegian had predicted a weak quarter and posted a loss of 3.28 billion kroner (302 million euros, $333 million) for the three months to March, compared to a loss of 1.98 billion a year earlier.

Sales dropped 19 percent to 6.5 billion kroner.

The earnings report comes only weeks after shareholders approved a rescue plan that would enable it to receive state aid and continue to operate.

Under the rescue plan, Europe’s third-biggest low-cost carrier is to convert into shares around 10 billion kroner of debt held by bondholders and leasing companies and raise between 300 and 400 million kroner in fresh capital via the issue of new shares.

Failure to obtain the funds would have resulted in bankruptcy for the airline, which has already cut 4,700 staff.

“Norwegian has gone into hibernation after taking drastic measures to preserve liquidity,” Norwegian said in a statement Thursday.

“Our goal is to ensure that Norwegian has a strong position in the future airline industry with a clear direction and strategy,” CEO Jacob Schram said in the statement.

“As soon as the world returns to normalcy, we will be prepared to return with improved service to our customers,” he said.

Out of Norwegian’s 147 aircraft only seven are currently flying and 80 percent of the carrier’s staff are on short-time work.

Even before the virus pandemic, Norwegian’s financial position had been increasingly precarious as the pioneer of long-distance low cost flights paid the price for an ambitious expansion gamble that has left the company with substantial debt.

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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