White House economic adviser Larry Kudlow said Monday that Washington would take steps to provide financial help to airlines suffering from the coronavirus pandemic, as a leading industry group asked for $50 billion in aid.
“We don’t see the airlines failing, but if they get into a cash crunch, we’re going to try to help them,” Kudlow said at the White House.
Airlines for America, the leading airlines trade group in the United States, is asking the federal government for $50 billion in grants, loans and tax relief, plus an additional $25 billion in the form of a suspension on excise taxes on tickets, fuel, and cargo until 2022.
“This is a today problem, not a tomorrow problem,” Airlines for America CEO Nicholas Calio said. “It requires urgent action.”
Talk of assistance for the airline industry comes as flight cancellations have worsened due to the coronavirus. The cancellations could force most airlines into bankruptcy by the end of May, according to a report released Sunday by CAPA Centre for Aviation, an airline market intelligence firm based in Sydney, Australia.
“As the impact of the coronavirus and multiple government travel reactions sweep through our world, many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants,” the report states.
The report also found that airline cash reserves are drying up because of flights being grounded.
The findings come on the heels of American Airlines on Saturday announcing that it would cut international flights by 75% starting Monday and ending May 6 in response to the falloff in customer demand. In addition to the international changes, the airline anticipates its domestic capacity in April will be reduced by 20% compared to last year and May’s domestic capacity will be reduced by 30% on a year-over-year basis.
Flight cancellations have been essentially across-the-board, as British Airways, Ryanair, easyJet, and Virgin Atlantic announced Monday that they would be grounding planes and cutting services by up to 80%. This news comes as United Airlines, SAS, Air France-KLM, and Air New Zealand have already grounded flights due to the virus.
The tidal wave of flight cancellations prompted the CAPA report to argue that “coordinated government and industry action is needed — now — if catastrophe is to be avoided.”
