Thehe airline industryndustry in meltdown
The sector has become a leading casualty of the Covid-19 crisis – and there’s no sign of blue skies ahead
Sir Richard Branson promised last month “to mortgage his Caribbean island”, Necker, to help raise money for his stricken airline Virgin Atlantic, said Jasper Jolly in The Guardian. Whether or not that was an empty promise, it has come too late for some 3,000 staff whose jobs are to be cut in a sudden cull that will wipe out almost “one in three” of the airline’s workforce. Virgin’s staff aren’t the only casualties: the airline also plans to quit Gatwick – adding to concerns about the airport’s future. British Airways has also cut back its Gatwick operations, warning “it could pull out altogether”, and the airport’s third-largest carrier, Norwegian Air Shuttle, is also teetering, having “only narrowly avoided bankruptcy” after a plan was agreed that will enable it to access state aid. Gatwick is putting on a brave face, claiming it remains “optimistic about long-term prospects”. Not everyone shares the sentiment. We’re used to airlines going down, but airports too?
Britain’s aviation sector is “shrinking” before our eyes, said Tom Burridge on BBC Business – and no one is “immune”. Indeed, the sector is reeling from a “bloody week” that also saw BA cut 12,000 jobs (a quarter of its workforce) and Ryanair slash 3,000, said John Collingridge in The Sunday Times. And the malaise is hitting the supply chain, too. Engine-maker Rolls-Royce is considering 8,000 redundancies; General Electric is slashing 13,000 aviationrelated jobs; and the European planemaker Airbus, which makes the wings for many of the world’s aircraft at its factory in Broughton, north Wales, has warned its “survival is at stake”.
There is some support for the sector, said Lex in the FT. Last week, the US planemaker Boeing sold some $25bn worth of bonds to private-sector investors. But the move takes its gross debt balance to $62bn while its market value – down 70% from its 2019 peak – is under $80bn. That doesn’t bode well, particularly if the rapid slowdown in air travel, coupled with the grounding of Boeing’s ill-fated 737 Max jet, continue to “hammer earnings”. The International Air Travel Association reckons global airline revenues will fall by 55% in 2020, said The Economist. That could be a conservative estimate: demand for international transport services is unlikely to “bounce back quickly”. In a symbolic move, the Australian flag-carrier Qantas has shelved its centrepiece “Project Sunrise” strategy of launching the longest direct flights in the world. It’s a big blow to Qantas, which has invested significantly in long-haul travel, said Jamie Smyth in the FT. And also for Airbus, which was to supply aircraft for the routes. Unfortunately, it’s unlikely to be the last big shock coming down the runway for a sector in turmoil.