The aviation sector carries the biggest risk of corporate default as a result of the coronavirus pandemic, according to a survey of insurers published by broker Gallagher on Tuesday. Only 29% of credit and political risk insurers had seen claims directly related to the virus so far, the survey of underwriters, conducted in June and July, showed. Companies or lenders buy credit insurance to get cover for non-payment for goods or services. Pandemic-related credit insurance claims are, however, likely to rise later this year or early next year, as businesses struggle to stave off default, said Matthew Solley, managing director of structured credit and political risks at Gallagher. Aviation, oil and energy, and tourism were the three sectors in their portfolios that concerned insurers the most. Insurers also worry about non-payment by governments, with Zambia seen the biggest risk. In the broader political risk insurance market, which can cover issues ranging from expropriation to war, Argentina was seen as the biggest concern.<br/>
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Airlines, including United, American, Southwest, JetBlue and Delta, have issued flight waivers in the wake of Tropical Storm Isaias, which made landfall in North Carolina on Monday night. Tropical Storm Isaias spawned tornadoes and dumped heavy rain as it roared up the East Coast on Tuesday morning after making landfall as a hurricane Monday night near Ocean Isle Beach, North Carolina. One of the tornadoes killed at least one person in Bertie County, North Carolina, Gov. Roy Cooper confirmed Tuesday morning. Other tornadoes were confirmed in Virginia and Maryland, the National Weather Service's Storm Prediction Centre said. What was once Hurricane Isaias was downgraded to a tropical storm, though it still packed winds of 70 mph as of Tuesday morning. Tornadoes are most likely through midday from southeast Virginia all the way to New Jersey, according to the 8 a.m. hurricane center forecast. Tornadoes will remain possible this afternoon and evening from southeast New York across New England.<br/>
American, Southwest and other airlines have begun meeting with congressional and White House leaders to extend aid to help the slowly recovering industry cover payrolls for another six months. Airlines, initially quiet about their requests for more government backing, are acknowledging to employees that they would like an extension of the previous payroll support program that prevented thousands of layoffs when the COVID-19 pandemic started. American Airlines CEO Doug Parker spent last week in Washington, D.C., talking with lawmakers and executive branch leaders, according to an audio town hall shared with pilots. And Southwest CEO Gary Kelly told employees in an audio message Monday “we are actively engaged with members of Congress and the administration” on a new bill. Both American and Southwest said they were support efforts by unions for expanded payroll grants during earnings announcements in late July, but have otherwise been publicly quiet. Airlines are approaching the request more cautiously than they did in March for the first CARES Act, balancing the desire to avoid furloughs with the public toll of taking taxpayer money. “It’s always tough for companies to ask the government for money,” said former Dallas Mayor and US Rep. Steve Barlett, who has also spent time as a financial industry lobbyist. “No one feels good about it. "<br/>
When IAG reported its predictably dire half-year results last Friday, the outgoing CE, Willie Walsh, warned that it will take at least until 2023 before “normality” returns – whatever that may be by then. Tim Jeans, former managing director of Monarch, goes further – at least in terms of traditional sunshine destinations. “Some people have been going to the Med four or five times a year. The appetite for discretionary trips will erode,” he says. As a result, Mediterranean routes may take 10 years to recover to 2019 levels, he argues. In the age of coronavirus, “throwaway” off-peak flights could prove difficult to fill. “Recent events have knocked confidence of people to book in advance,” he says. The abrupt travel warning to Spain and corresponding quarantine rules for returning travellers looked like it's wiping out August, the peak month for the UK’s favourite holiday nation. Yet a couple of voices have suggested that the summer may not turn out to be as dismal as we feared. “I am really encouraged that we have seen higher than expected levels of demand with [a] load factor of 84% in July,” said Johan Lundgren, CE of easyJet, in a trading update Tuesday.<br/>
Kuwaiti aircraft leasing company Alafco has halved its order for 40 Boeing 737 jets after reaching an agreement to end its legal claim over a cancelled order for the planes, it said Tuesday. Alafco was suing the US planemaker for $336m over accusations Boeing wrongly refused to return advance payments on a cancelled order for 40 of the grounded 737 MAX planes. A Boeing spokesman said Alafco "voluntarily withdrew its lawsuit, which permitted us to resume commercial discussions and reach a mutually-agreeable resolution." The Kuwaiti lessor will now buy 20 aircraft from Boeing, instead of the 40 on its order book, with new delivery dates, Alafco said in a bourse filing. Additional details of the agreement could not be disclosed due to confidentiality clauses, it said. Alafco, which followed other lessors in cutting 737 MAX orders, said it was "looking forward to a long-lasting and mutually beneficial relationship with Boeing."<br/>
Spirit AeroSystems Tuesday reported a bigger-than-expected quarterly loss and pushed its target of becoming cash flow positive by another year, as top customers Boeing and Airbus slashed production due to a collapse in global travel. Spirit said it now expects to generate positive cash flow in 2022, instead of 2021, and its current-quarter results will be further hit due to fresh production cuts announced in July by Boeing and Airbus. Boeing’s 787 Dreamliner and Airbus’ A350 are among the most profitable for the planemakers, but demand for the long-haul jets has sharply fallen due to the COVID-19 pandemic as cash-starved airlines defer deliveries to save money and stay in business. Boeing, which accounts for nearly 80% of Spirit’s revenue, said last month it would cut 787 output to six units a month in 2021, the fourth such cut since last year when output touched a record 14 units a month. Airbus also cut production of A350 to five jets a month last week, after dropping it to six from 9.5 in April. Spirit booked $194.1m in charges mainly related to the 787 and A350 cuts in Q2, and said will take another charge of about $46.5m in the current quarter. <br/>