The Trump administration’s bailout of US airlines is seeing the US Treasury taking just a nominal equity interest in return for grants and low-interest loans, attracting criticism it has been too generous to the companies’ shareholders. Terms of the deal explicitly prevent executives from quickly launching the painful restructuring other countries’ airlines are already doing, as they fight to survive in a world of much restricted air travel. “This was a so-called bailout that required the CEOs to run their airlines in a way that no free market CEO who didn’t have the government aid would ever do,” said one of the bankers involved in negotiations between the Treasury and the airlines. So far 93 US airlines have secured $12.4b of an available $25b in government funding for payrolls, each getting 70% in the form of grants that do not have to be repaid. As well as curbing share buybacks and executive pay, companies that took the money agreed not to lay off staff or axe routes until September 30 — even though air passenger volumes in the US have fallen by more than 90% since March, and a V-shape recovery is no longer in the cards. European carriers have announced waves of cuts but US airlines are still at the planning stage. United’s incoming CE, Scott Kirby, said he would cut cash burn from $40m a day now towards $30m a day in Q3 and then $20m a day in Q4, if travel has not rebounded. “The difference between that third-quarter number and that fourth-quarter number is really about employees,” he told investors earlier this month.<br/>
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The chairman of the US House Transportation Committee called on airlines Thursday to dramatically cut back the number of seats they offer on aircraft to promote social distancing. Rep. Peter DeFazio said he was acting after seeing a tweeted photo from a physician on a United flight from Newark, New Jersey, to San Francisco, that showed passengers in every seat. Dr Ethan Weiss' tweets said passengers, including a group of 25 fellow health workers like himself who had been caring for coronavirus patients in New York, were "shocked" and "scared" at the sight of a full Boeing 737. "I would be, too, if I were about to spend the next five hours sealed in a tube with up to 184 passengers, all seated inches from one another, and any number of whom could be a carrier of COVID-19," wrote DeFazio, a Democrat from Oregon, in letters to two industry groups, Airlines for America and the National Air Carrier Association. DeFazio requests that the airline members of both groups voluntarily leave at least one empty seat between passengers, a move that he says would reduce the maximum load factor on narrow-body aircraft to 67% because of all the unoccupied middle seats.<br/>
In response to the growing number of consumer complaints to the US DoT over flight refunds in light of the coronavirus pandemic, a group of Democratic senators have signed on to a bill that would require major airlines and third-party ticket sellers to offer full cash refunds for all cancelled tickets — regardless of whether the airline canceled the overall flight or the passenger canceled their individual ticket. The Cash Refunds for Coronavirus Cancellations Act would allow airlines to pay for the refunds using emergency money made available by Congress as long as the money designated for employee benefits and payroll by the Cares Act remains untouched. “Americans need cash in their pockets to pay for food, housing, and prescriptions, not temporary credits toward future travel,” Sen. Edward J. Markey (D-Mass.) said in the bill announcement. “In light of this pressing need, and an unprecedented multi-billion dollar bailout, it’s absolutely unconscionable that the airlines won’t give consumers their money back.”<br/>
Some of the nation's smallest airlines are facing some of the biggest headaches in coping with the travel meltdown. Three regional airlines have already stopped flying as passengers shun air travel out of fear of the coronavirus. Industry officials worry that other small carriers could fail, leaving smaller cities and towns even more isolated. "There is an extremely high risk to small community air service right now," said Faye Malarkey Black, CEO of the Regional Airline Association. Regional carriers are usually independently owned businesses that affiliate with major airlines to feed passengers into hubs from cities that don't have enough passengers to merit mainline service. But because they serve small markets that are less profitable than bigger ones, they are more vulnerable to downturns, Black said. Trans States Airlines, a United Express carrier, suspended operations in April. It was followed by Compass Airlines, which flew as American Eagle and Delta Connection. Both are owned by Trans States Holdings. The company had planned to wind down Trans States Airlines' operations and funnel its employees into another of its commuter airlines, GoJet Airlines. But when the pandemic struck and passenger volume dried up, it pulled the plug. It also grounded Compass after an effort to find a new partnership fell through in light of the COVID-19 crisis. The third airline ceasing operations is RavnAir Group, based in Anchorage, Alaska, which filed for Chapter 11 bankruptcy reorganization last month after 90% of its passenger revenue dried up. Story has more. <br/>
Boeing CE David Calhoun’s prediction of a major US airline’s demise has prompted complaints from some of the plane maker’s biggest customers as they grapple with fallout from the coronavirus pandemic, people familiar with the matter said. American Airlines Group CEO Doug Parker called the Boeing chief this week to express surprise and disappointment after Calhoun said that a major US airline would most likely go out of business by this fall, one of these people said. Calhoun’s comments weren’t well-received at United Airlines either, people familiar with the matter said. United also conveyed displeasure to Boeing over Calhoun’s remarks. Calhoun said he expected demand for air travel to bounce back to 2019 levels in three to five years. Asked if he thought a major U.S. carrier might go out of business, Mr. Calhoun said: “Well, I don’t want to get too predictive on that subject, but yes, most likely. Something will happen when September comes around.” “What did he just say?” is how one person described the initial reaction among some executives at American. Some industry leaders said Calhoun’s comments left them wondering why the plane maker’s CEO would speculate about a customer’s potential failure while carriers are negotiating financing deals, including with the US Treasury for taxpayer stimulus.<br/>
Russia’s government is allocating Rb23.4b ($317m) to the country’s carriers to provide financial support as the coronavirus crisis begins to affect their operations substantially. Passenger traffic among Russian airlines was down by 93% in April. Aeroflot, Rossiya and Ural Airlines passengers numbers fell by 92-95%, while Utair’s and S7 Group’s figures respectively slumped by 89% and 79%, according to preliminary data from federal air transport regulator Rosaviatsia. The impact of the crisis has started to show in financial results. Aeroflot’s Q1 figures, published under local accounting standards, reveal a net loss of Rb16.1b – around the same level as the previous year, but the airline points out that last year’s loss was already “unusually high” as a result of fuel costs. Rosaviatsia says the state support will “ensure the continuation of Russian airlines’ activities”, and is intended to repay costs of carriers engaged in commercial transport over February-July 2020. The subsidy will enable airlines to pay the salaries of aviation personnel, and partially contribute towards leasing payments and airport parking fees.<br/>
The country’s airlines are in dire need of financial stimulus to withstand the COVID-19-induced crisis, amid a sharp revenue decline and looming deadlines for short-term liabilities, the Indonesian National Air Carrier Association (INACA) has said. The comments came as Garuda Indonesia was in discussion to receive a state capital injection of Rp 8.5t as a derivative of the latest issuance of Government Regulation No. 23/2020 on the national economic recovery program. With the current situation, the INACA has called on the government to provide financial stimulus for the ailing airlines in the form of credit relaxation and soft loans. “Airlines need stimulus to get fresh working capital to resume operation after two months of halted operation, and also to help them pay their restructured debts,” INACA chairman Denon Prawiraatmadja said Tuesday. Garuda grappled with US$3.25b in short-term liabilities, including $498.9m in sukuk (Islamic bonds) due to be paid on June 3 this year, according to its 2019 financial report. However, with decimated passenger numbers and grounded fleets, other airlines are grappling with debts and obligations to fleet lessors. Currently, airlines are still burdened with costs such as parking fees for their grounded aircraft, maintenance costs, pilot license fees, and many other costs, Denon added.<br/>
Thousands of passenger planes have been taken out of the skies and moved into storage. That's not just a financial nightmare for airlines, it's a logistical nightmare for global shipping. About about half of the world's air cargo is transported by passenger planes that tuck shipments into the belly of the aircraft. Although many businesses and manufacturing plants are on pause, reducing overall demand for air shipments, there is still an urgent need to keep medical gear moving around the world. The sudden plunge in the number of passenger flights — a 95% drop off in flights worldwide — has caused an "immediate and severe" shortage in air cargo capacity, according to the IATA. Shipping companies, which use aircraft specifically designed to haul cargo, are flying at maximum capacity, and some companies are bringing more freighter jets into service. US passenger airlines used to have all cargo flights, but for the most part discontinued them decades ago. But airlines such as United and Delta have started once again flying dozens of cargo-only flights, some with goods stuffed into overhead bins as well as the plane's cargo hold while seats sit empty. A few foreign carriers have even strapped packages to seats or removed seating to make room for more cargo.<br/>That helps airlines bring in some badly needed revenue — though cargo flights likely won't make up much more than a tiny fraction of the money airlines are losing from the nosedive in passenger travel. And so far, those efforts haven't made up for the overall cargo capacity shortage, either, and the bottlenecks have allowed airlines and cargo carriers to charge about 30% more for shipments. In some cases, prices had even quadrupled, said Brandon Fried, executive director of the Airforwarders Association.<br/>