LOCAL airlines are seeking government assistance in the face of significant revenue losses and possible bankruptcy following the shutdown of their operation to combat the spread of coronavirus disease (COVID-19).
In a letter to government agencies dated March 25, 2020, the Air Carriers Association of the Philippines (ACAP) asked for credit guarantees, waiver of navigational and rental taxes and emergency credit lines.
ACAP is composed of Philippine Airlines, Cebu Air Inc. and Philippine AirAsia Inc.
“Given these extraordinary times where the survival of the domestic airline industry is at stake, ACAP member-airlines urgently appeal to your good office for timely government intervention which is indispensable if Philippine aviation will have the capacity to resume its vital role of connecting the people of the archipelago for trade, commerce and tourism and contribute meaningfully to the recovery of the economy,” said Roberto Lim, ACAP vice chairman and executive director, in his letter to the Departments of Transportation, Finance, Tourism and Trade and Industry and the National Economic and Development Authority.
Passenger operations of the airlines are suspended until April 14, 2020, translating to 30,000 cancelled flights and affecting almost five million passengers.
Lim said even during the suspension, the carriers’ fleets are still required to pay their average aggregate fixed cost of around P8 billion per month.
“We request government to provide a credit guarantee scheme (not cash) that guarantees the banking sector’s loans and credit lines, most of which are secured with collaterals, to remove its aversion to the poor credit risk of the airline industry under the present operating environment. It cannot be overemphasized that only the government is in a position to manage the extraordinary situation facing the industry where its ability to generate revenue has been frozen,” Lim said.
ACAP also asked emergency lines of credit for six months.
“Airlines and other companies in aviation allied industries, such as maintenance, ground handling and catering providers carry enormous fixed costs mainly associated with aircraft and equipment and to their assets required to maintain operations. To enable airlines and support industries to restart operation after the lifting of the ECQ (enhanced community quarantine), we ask the government to provide access to emergency lines credit to help fund six months of operation perhaps longer if this crisis extends, in order for the industry to remain viable under overall demand recovers,” the group saod.
ACAP is also asking a longer term facility to ensure a successful recovery plan.
It said a long-term facility at attractive rates or a guaranty facility would enable airlines to restructure debt to a more manageable level and give them leverage to negotiate better terms from aircraft lessors bankers and creditors.
Local airlines are also asking for a waiver of all navigational and airport charges.
“Under the circumstances, ACAP member airlines respectfully request for a full waiver of all navigational and airport charges including airport office rentals and land leases until the end of December 2020,” Lim said in the letter.
“ACAP member airlines are not seeking a handout at the expense of Filipino taxpayers. Rather what is being sought for is ready access to working capital which is required to restart and sustain continued viable operations,”ACAP added.
ACAP member-airlines assured the government these financing schemes will be used for legitimate business stabilization purposes with the corresponding corporate governance in place.
ACAP said the assistance received last February of deferment of navigational and/or airport charges is no longer enough.
Meanwhile, ACAP cited that with this catastrophic impact of COVID-19 on the aviation industry, airlines all over the world are already in talks with their respective governments for relief packages and many have already granted, Qantas and Jetstar will received AU$715million, Air New Zealand will be provided a government loan facility of up to NZ900 million while the Canadian government promised $828 aid package for carriers among others.
