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Airlines cut domestic fares by an average 23% last month as traffic picked up from April lows, global industry body IATA said on Wednesday, warning that post-coronavirus discounting posed a further threat to profitability. Domestic passenger traffic rose 30% globally in May from a very low base in April, when much of the industry was brought to a near-standstill by the COVID-19 pandemic, IATA said. But the uptick came at the price of fare cuts that airlines can ill afford on top of extra health measures and other new coronavirus-related costs. "Airlines need cash because of the crisis and they're seeking to encourage passengers into seats by offering low fares," IATA Chief Economist Brian Pearce said. "The challenge (is) that unit costs will have been increased by a number of restrictions that have been put in place," he said, predicting "quite a difficult time for airlines" as flights gradually resume. A return to profitability remains a distant prospect for many carriers, and the crisis may cost the industry $314b in lost revenue, IATA predicts.<br/>

Many of the world’s airlines already stung by the pandemic grounding flights are now finding out what a risky place the oil market can be. Ten airlines in Europe and the Asia-Pacific -- where carriers tend to purchase oil derivatives to hedge against volatility in fuel prices -- have lost about $4.65 billion on those contracts this year, according to financial results compiled by Bloomberg through June 3. Lufthansa and IAG account for about half the total. The hedging strategies that European airlines routinely employ are “not effective in a crisis such as the one at the moment,” Lufthansa CEO Carsten Spohr said on an earnings call Wednesday. “But obviously who could have expected this?” To guard against oil-price volatility, airlines can buy call options to shield them from soaring fuel costs. To cheapen the transaction, they often simultaneously sell put options, which can become costly if prices fall. As the pandemic unfolded, demand for fuel collapsed, with crude at one point plummeting to its lowest level in almost two decades. Carriers were left holding positions in oil contracts that weren’t needed as fuel consumption tanked, and no way to offset those costs with fleets grounded. Story has more.<br/>

China on Thursday said it would allow foreign airlines currently blocked from operating in the country over coronavirus concerns to resume limited flights, lifting a de facto ban on US carriers. The move by China's civil aviation authority comes after Washington ordered the suspension of all flights by Chinese airlines into and out of the US from June 16 in retaliation against Beijing's restrictions on American and foreign carriers. The row adds to growing friction between the world's two largest economies amid the coronavirus crisis and in the wake of a two-year trade war that has not been fully resolved. The latest spat is rooted partly on the Civil Aviation Authority of China (CAAC) deciding to impose a limit for foreign airlines based on their activity as of March 12. But US carriers had suspended all flights by that date because of the pandemic -- meaning their cap was set at zero -- while Chinese carriers' flights to the US continued. The CAAC on Thursday said all foreign airlines not listed in the March 12 schedule would now be able to operate one international route into China each week. Passengers must be tested for COVID-19 upon arrival in China.<br/>

The Trump administration threatened Wednesday to bar mainland Chinese airlines from flying to and from the US starting later this month, saying Beijing has failed to approve resumption of these routes by US carriers. The threat of a ban was the latest sign of souring US-China relations that are at their worst in more than three decades. Some US airlines have sought to resume service to China this month after suspending flying there earlier this year, as the coronavirus pandemic took hold. The US DOT, led by Secretary Elaine Chao, said Wednesday that the Civil Aviation Administration of China hasn’t approved requests by United and Delta to resume flights. The DOT accused China of violating an agreement that governs air travel between the two countries. The transportation agency said it would reconsider its planned ban, if Chinese regulators adjust their policies to allow US carriers to return. “Our overriding goal is not the perpetuation of this situation, but rather an improved environment wherein the carriers of both parties will be able to exercise fully their bilateral rights,” the DOT’s order said. “Should the CAAC adjust its policies to bring about the necessary improved situation for U.S. carriers, the Department is fully prepared to revisit the action it has announced in this order.”<br/>

While much of Europe starts to open up for the summer, with the hope of sparking economic recovery now that Covid-19 cases are falling, the UK risks remaining behind. Home secretary Priti Patel prompted criticism from the travel and tourism industry and from senior conservative MPs when she confirmed on Wednesday that Britain would impose quarantine measures from next Monday and require travellers from abroad to self-isolate for 14 days. The UK’s GBP22bn-a-year aviation industry has warned that this will add to the crisis that has already led airlines to seek emergency government loans to survive the near-universal collapse in air travel. The hospitality industry has said the measures could put 1.2m jobs at risk. Jozsef Varadi, CE of Wizz Air, has called Britain’s determination to press ahead with quarantine for airline passengers pointless and unnecessarily “harsh”. He pointed out that many countries were exploring alternatives such as health certificates to prove travellers had been virus-free for 72 hours or more. In other parts of the world, Singapore and China have established a bilateral arrangement that begins next week. Travellers must submit applications sponsored by government agencies or companies they are visiting in advance and take a test.<br/>

Rolls-Royce has announced the locations of its first 3,000 redundancies in the UK, as the jet-engine manufacturer makes deep cuts to its civil aerospace business in response to the coronavirus pandemic. The company last month announced it would cut 9,000 jobs across its global operations because of expectations of lower demand for air travel using its engines for years to come. The first round of cuts will be carried out through a voluntary redundancy programme in 2020, with the 1,500 jobs at the company’s manufacturing headquarters in Derby and surrounding sites in the east Midlands. Approximately 700 of the redundancies will be in Inchinnan, near Glasgow, with another 200 at its Barnoldswick site in Lancashire, and 175 in Solihull, Warwickshire. There will be smaller cuts at Rotherham, Washington, Denby, Bristol, Ansty near Coventry and London Heathrow. The Rolls-Royce CE, Warren East, suggested last month that about two-thirds of the 9,000 job cuts would fall in the UK, with another 3,000 redundancies expected in 2021. Before the job cuts were announced, Rolls-Royce employed 52,000 staff globally. As well as making and servicing commercial jet engines, it also makes fighter jet and ship engines in addition to reactors for nuclear submarines. However, it said there would be no job losses at its defence business.<br/>

Berlin’s Tegel Airport has been given a reprieve as easing travel restrictions create demand for flights at the Cold War-era facility. Passenger traffic is expected to pick up again in coming weeks as lockdowns ease across Europe, and Tegel will therefore remain open through October, according to operator Flughafen Berlin Brandenburg GmbH. “We have to support the newly regained freedom to travel while maintaining high standards of hygiene and distancing,” CEO Engelbert Luetke Daldrup said Wednesday. “We have to offer enough space to the airlines.” Berlin authorities and FBB said last month the airport to the north of the city centre would be allowed to suspend operations from June 15 after the coronavirus virtually halted air travel. Flights were slated to be handled instead at Schoenefeld to the southeast of the city until the long-delayed BER airport -- located at the same site -- opens at the end of October.<br/>

Airlines, airports and insurers across Asia are bracing for the prospect of unusually high damage as the region's tropical storm season begins, as hundreds of aircraft grounded by the coronavirus pandemic can't be moved easily. Major airports in storm-vulnerable regions such as Hong Kong, Taiwan, Japan, the Philippines, Thailand and India have been effectively turned into giant parking lots as COVID-19 travel restrictions choke demand. "If you have got those aircraft on the ground, you can imagine to get them back up and running in a short space of time is no easy thing," said Gary Moran, head of Asia aviation at insurance broker Aon. "The challenge is you can have a typhoon or hurricane coming and there are going to be a lot of aircraft that aren't going to be able to be moved in time." Airline insurers, already on the hook to refund large portions of crash risk premiums because of the groundings, now face the larger-than-usual risk posed by having lots of airplanes grouped together at airports, industry experts said. "One event could create damage which costs millions to repair, maybe even closer to hundreds of millions depending on the aircraft that are involved," said James Jordan, a senior associate at law firm HFW's Asia aerospace and insurance practices. <br/>