general

The global airline industry has been disproportionately affected by the coronavirus pandemic, and the strain on its once flourishing fundamentals will affect a broad swath of the world economy well into 2022 and beyond, Moody's Investors Service says in a new report. The industry is one of just a few that saw demand drop by more than 90% within weeks of the onset of the crisis. While air travel itself is a key facilitator of tourism spending, the outsourcing by airlines of many services, along with significant employment and fuel consumption in normal economic times, similarly supports economic activity across many sectors. "Passenger demand for air travel drives demand for key stakeholders in the aviation industry, including airport operators, aircraft leasing companies and aircraft manufacturers, as well as a multitude of service providers that keep airlines and airports running," said Jonathan Root, a senior VP of Moody's. "We expect each of these stakeholders will be significantly impacted for at least the next three years, with 2020 declines for their products and services anticipated to be in the 40% to 50% range, if not higher." As passenger traffic eventually improves, airports will recover first along with airlines, followed by aircraft lessors and then aircraft manufacturers. The broad base of global suppliers that feed the aircraft manufacturers will be the last to regain their footing, but not before 2023, according to Moody's. In terms of demand recovery, Moody's models anticipate a recovery in passenger demand close to 2019 levels by the end of 2023, once the concerns related to personal health and safety are relieved. Passenger airlines supported about 3% of world GDP in 2019, according to the International Air Transport Association (IATA). Airline cargo operations materially bolster international trade, with movement of more than $5 trillion of goods in 2019.<br/>

At least 202 aviation companies double-dipped into federal programs designed to prop up struggling businesses during the coronavirus pandemic — to the tune of about $1b, according to a Washington Post review of federal data. The companies include a Chicago catering firm under investigation by Democrats in Congress for laying off almost 900 workers this spring; an Ohio aircraft maintenance business that closed an office and put 52 people out of work just days after securing a loan of at least $5m under one of the programs; and a Wisconsin airline that has warned of hundreds of temporary layoffs come fall. Earlier this month, the office of the new Special Inspector General for Pandemic Relief, a government watchdog, questioned the practice of letting companies benefit from both programs, saying it “was not obvious” why airlines in particular would need help twice over and that it planned to monitor the issue. “Creating multiple programs resulting in multiple forms of financial support to a single individual or entity may well be sound policy,” the inspector general’s office wrote. “But in such circumstances, the risk of fraud and abuse increases and questions arise.”<br/>

The US government has left unchanged a 15% tariff on Airbus aircraft imports following a required review of a broad $7.5b tariff package on European products. The WTO approved the tariffs in October 2019 as compensation for European subsidies received by rival Airbus. The long-running dispute has pitted the USA against the European Union, France, Germany, Spain and the United Kingdom. “The EU and member states have not taken the actions necessary to come into compliance with WTO decisions,” says US Trade Representative Robert Lighthizer. “The United States will begin a new process with the EU in an effort to reach an agreement that will remedy the conduct that harmed the US aviation industry and workers and will ensure a level playing field for US companies.” The USA imposed the tariffs on 9 October 2019. US trade laws require periodic tariff reviews. In a regulatory notice, the Office of the United States Trade Representative says the EU “has not taken action on six of the launch aid measures” identified in the WTO proceedings. It adds that recent amendments by the EC to French and Spanish A350 launch aid contracts do not succeed in “withdrawing the subsidies received by Airbus”.<br/>

The US DoT internal watchdog said on Wednesday it is including a group of airport contractors in its audit of a coronavirus stimulus program aimed at aiding the aviation sector, after lawmakers pressed the agency to halt their funding. The group of stimulus recipients called out by Democrats in the U.S. House of Representatives last month for laying off workers are being included in the watchdog's audit of the Payroll Support Program though no investigative work is planned at this time, Treasury Department Deputy Inspector General Richard Delmar said. Last month, the three key lawmakers asked the Treasury Department to halt government assistance to a dozen contractors that received more than $728m in federal funds and have laid off more than 9,000 workers. The lawmakers specifically sent letters to executives of Gate Gourmet, Swissport USA, Flying Food and G2 Secure Staff for taking funds through the Payroll Support Program and laying off workers. Those companies will be included in the audit, the Treasury IG said. A spokesperson for Gate Gourmet said the layoffs and furloughs took place well before any of the funds were disbursed and previously, the company has said the cuts were necessary during the unprecedented times.<br/>

Hong Kong International Airport said Thursday that passengers from mainland China would be able to transit through Hong Kong to other destinations from Aug. 15 until Oct. 15, in a boost for its dominant carrier Cathay Pacific Airways. Transit in the other direction, inbound to mainland China, will remain banned at a time when China's aviation regulator has severely limited the number of international flights due to concerns over the spread of coronavirus. That has caused ticket prices for those looking to return to China to soar. Cathay will be the main beneficiary of the new policy, which the South China Morning Post reported was aimed at helping students resume studies at overseas universities, given rival Hong Kong Airlines flies only regionally in Asia. Cathay Chief Customer and Commercial Officer Ronald Lam said Wednesday that opening mainland transit flights would improve its passenger volumes and that it could gear up at short notice to add flights. He said one-third of Cathay's passengers were transiting the airport at present for connecting flights, down from around 40% to 50% before the pandemic when mainland passengers were allowed to transit in both directions.<br/>

Australia’s consumer watchdog is investigating international airlines flying into the country during the pandemic, amid allegations operators are cancelling economy passengers’ tickets in favour of business and first-class customers, as companies comply with a strict cap on overseas arrivals. The Australian Competition and Consumer Commission’s inquiry comes after the opposition infrastructure and transport spokeswoman, Catherine King, wrote to the ACCC chair, Rod Sims, on Wednesday following the Guardian’s reports of allegedly “unethical” behaviour from some airlines. Accusations include customers claiming airlines are repeatedly removing economy passengers, citing an overbooked flight, while still selling more expensive seats for the same service on their websites. Australian families stranded in Lebanon for more than a month after their original flight was due to depart are among the travellers waiting for airlines to honour their economy tickets back home. On Wednesday, Qatar Airways was only selling business-class tickets to Australia, with a one-way Doha-to-Sydney ticket priced at $8,400. The next economy ticket available was on 20 September, for $3,600 one way. <br/>

The ban on international commercial flights will remain in force while the Covid-19 pandemic situation remains critical in many countries, the Civil Aviation Authority of Thailand (CAAT) said Wednesday. It is an indefinite ban, said CAAT director Chula Sukmanop and the Centre for Covid-19 Situation Administration (CCSA) would monitor the global situation before deciding when the flights could resume. Chula said the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) had told the government that a large number of foreigners intended coming to Thailand on business, so officials were checking if there were enough state quarantine (ASQ) facilities available. More private accommodation providers were applying to become ASQ-certified, he said, restating that those arriving would have to pay their quarantine expenses themselves. They would also be required to notify Thai officials in advance where they would be staying while in the country and complete the mandatory 14-day quarantine period. A number of foreign people seeking medical treatment in Thailand under a special entry programme are required to stay at a contracted hospital for at least 14 days to ensure they don't bring in and spread the virus, he said, adding: "As of now, no commercial airlines are permitted to operate flights into and out of Thailand and only a number of foreign businesspeople are allowed to enter the country for business purposes."<br/>

Airbus is stepping up development of its newest plane, pouring resources into the A321XLR even as it pulls back spending on other projects to save cash. The jet, dubbed XLR for “extra long range,” would be the longest-distance version yet of Airbus’s top-selling A320-series narrow-body. It has racked up more than 450 orders since its launch last year, and the European planemaker sees it as resistant to the historic collapse in demand for aircraft brought on by the coronavirus. The model has proved attractive to carriers eager to fly further with the economics of a single-aisle plane, and now has 24 customers, including American Airlines Group, JetBlue Airways and United Airlines. Its range of 4,700 nautical miles is 15% more than the existing A321 LR. The goal is to ensure that the XLR enters service on time in 2023. Chief Executive Officer Guillaume Faury has identified the new model as one that can help the company through a slump in demand that’s likely to weigh on single-aisle output until 2022, saying in April that the XLR “will be a fantastic plane as we go out of the crisis.” While it’s pulled back on investments -- slowing the ramp-up of its A220 single-aisle, for example -- Airbus has added resources to the A321XLR, including assigning more engineers, according to people familiar with the matter, who asked not to be named discussing internal decisions.<br/>

Boeing’s 737 Max backlog declined nearly 20% in the first seven months of 2020, with the company stripping more than 850 jets from its books due to order cancellations and accounting adjustments. The tally includes recently released data from July and comes as Boeing tackles the dual challenges of the 737 Max grounding and the airline industry downturn. Despite those pressures, however, Boeing says its backlog remains strong.<br/>And aerospace analyst Michel Merluzeau suspects the Max will have a strong future, assuming the aircraft safety returns to service. Boeing has predicted that the Federal Aviation Administration will certificate the aircraft in time to allow Boeing to resume deliveries in the fourth quarter. Boeing says that in July customers cancelled another 43 737 Max orders. Those bring to 416 the number of Max orders cancelled since the start of the year, according to data from Boeing. Lessors have accounted for the majority of the 416 Max cancellations so far in 2020. They nixed at least 289 Max orders, or about 70% of the total, figures show. Those lessors include companies like AerCap, Air Lease, Avolon and GE Capital Aviation Services. Airlines have cancelled at least 71 of the jets – or 17% - while the remaining 56 cancellations come from unnamed customers and include Boeing Business Jet variants of Max.<br/>

CAE Inc said Wednesday it is in advanced discussions with airlines about doing more training of their pilots after the company reported a bigger than expected quarterly loss due to COVID-19. The world's largest civil aviation training company is cutting costs and counting on the easing of travel restrictions to bolster demand for pilot-training services. Revenues from civil training, CAE's largest business unit, dropped due to travel restrictions and lower customer demand during the quarter ended June 30, with a center utilization rate averaging 33% compared with 76% during the same three months a year earlier. CE Marc Parent told analysts he sees opportunities to win outsourced training business from airlines, which are struggling to conserve cash. "We're currently in advanced discussions with a number of airline customers to potentially do more for them," he said. CAE said deliveries of flight simulators declined on an annual basis from five to two units during the quarter. CAE would make most of its anticipated 35-40 simulator deliveries during the back half of its fiscal year. Demand for CAE's flight simulators is linked to new aircraft deliveries by planemakers Boeing and Airbus, which are seeing lower jet sales.<br/>

Japanese businessman Katsuo Inoue chose Italy for this year's summer vacation, and he enjoyed the trimmings of a business class cabin and soaked up the sights of Florence and Rome - without ever leaving Tokyo. Inoue, 56, and his wife "flew" as clients of Tokyo entertainment company First Airlines, which is tapping into a growing virtual reality travel market for Japanese holidaymakers grounded by coronavirus restrictions. "I often go overseas on business, but I haven't been to Italy," he said. "My impression was rather good because I got a sense of actually seeing things there." Grounded travellers sit in first or business class seats in a mock airline cabin where they are served in-flight meals and drinks, with flat panel screens displaying aircraft exterior views including passing clouds. Virtual reality goggles provide immersive tours at destinations including - as well as Italy's cities of culture - Paris, New York, Rome and Hawaii. The coronavirus has stopped most travel from Japan. The country's biggest airline, ANA Holdings, said numbers flying to foreign destinations on its planes fell by 96% in June. The IATA predicted last month that it would take until 2024 for global passenger numbers to recover. At First Airlines, where "passengers" are even given a pre-flight safety demonstration with a life vest and oxygen mask, bookings are up about 50% since the pandemic began, according to the company.<br/>