◼ BUSINESS Bloomberg Businessweek March 30, 202015AIRPORT:
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● As Europe’s airline industry flies into the red,
it’s seeking bailout assistance to surviveIs Government Aid the
New Jet Fuel?
EarlyinMarch,aviationexecutivesconvenedin
Brusselstodiscussthestateoftheirindustry.The
coronaviruswasraginginAsia,crushingtravel
demand,butEuropelookedsettododgea major
hit,orsobelievedtheparticipantsintheconference.
Bookingswouldlikelyreturntonormalin
a fewweeks,and“peoplewillgetboredofthe
coverage”ofthevirus,RyanairChiefExecutive
OfficerMichaelO’Learypredicted.Besides,air-
linesshouldn’tusetheoutbreakasanexcuse
to seek governmentaid andprop upfailing
businesses.“Keepcalm,givepeoplerational
advice,andthenletthebankruptgobankrupt,
becausethat’swhat’sgoingtohappen—whether
it’sbefore,during,orafterCovid-19,”O’Learysaid.
Less than a monthlater, the global avia-
tionindustryistryingtoholdontoa business
facingannihilationfromthevirus,whichis now
wreakinghavocinEurope,thenewepicenterof
thepandemic.
Airlinesacrosstheglobeface$252billioninlost
revenuethisyear,theInternationalAirTransport
Association,whichrepresents 290 airlines,warned,
callingthecrisismoreseverethananythingthe
sectorhaseverfaced.Theoutbreakwillreshape
theindustry,withmanyairlinesfailing,others
consolidating,andentirelynewalliancesemerging,
thegrouppredicts.
Governmentshavelongheldtheirprotective
handsoverairlines,inpartoutofnationalpride,
inparttosecurejobs.Germanyalonehasmore
than100,000peopleworkingintheaviationsec-
tor,themajorityatprivatecompaniessuchas
DeutscheLufthansaAGorthemajorairportoper-
ators.Asa result,flagcarriershaverarelygone
under,witha fewexceptionssuchasMalevin
Hungary,SabenainBelgium,andSwissair,which
collapsedin 2001 onlytoberebornasSWISSand
foldedintotheLufthansagroup.
Asthecoronavirushasscaredawaytravelers,air-
linesfromLufthansatoNorwegianAirShuttleASA
haveaskedforgovernmentassistanceafterground-
ingtheirfleetsonanunprecedentedscale.Even
BritishAirways,whichhadinitiallybelittledcalls
forU.K.assistancebysmallerrivalVirginAtlantic
AirwaysLtd.,is lobbyingforgovernment help.
The carriers’ implicit message to their homegovernments: Engineer bailouts or prepare to see
some local champions grounded for good. That’s
put governments in the challenging position of
trying to pick deserving recipients for state fund-
ing.Theresponsesofarhasshownlittlecoordi-
nationacrosstheregion.Italy,thehardest-hit
country, with almost 7,000 Covid-19 fatalities,
pledged €600 million ($647 million) to nationalize
Alitalia. Norwegian Air Shuttle secured government
funding worth as much as $270 million to keep it
going, though with many strings attached. Finland
pledged €600 million of guarantees to prop up
Finnair, of which the state owns almost 56%, while
Stockholm-based SAS AB will get a total 3 billion
Swedish kronor ($300 million) in state guarantees
from Sweden and Denmark. “With airlines having
to ground fleets, they’re still liable for lease rentals
and other fixed costs, and without state support,
they will fast go out of business,” says Mark Martin,
an aviation consultant based in Delhi.
Not every carrier has been met with open purse
strings. Flybe, Britain’s largest domestic airline,
failed on March 5 after the U.K. earlier this year
decidednottodeferitsmassivetaxbillevenasit
struggledwitha virus-causedtrafficplunge.A jet
fuelsuppliercutit off,andcreditorsbeganseizing
its planes.
Europe has been no stranger to struggling air-
lines. Some went bust in recent years, such as Air
Berlin and Monarch in the U.K., while othersRisingDefaultRisk
Annualcosttoinsure$10millionofbonds
American United AirFrance Delta Lufthansa JetBlue$1.5m1.0m0.5m0 k
1/1/20 3/23/Rising prices of credit-default
swaps, which offer insurance
against a company defaulting
on its debt, show that investors
have doubts about airlines’
ability to weather the downturn