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The Global Aviation Industry Dilemma Under the Epidemic, and How to Solve It? (2)

Source:Iris Liang Time:2020-6-16 9:09:38

At present, the four major US airlines-American Airlines, United Airlines, Delta Air Lines and Southwest Airlines now have a total of about 100,000 employees voluntarily take unpaid or low-pay leave, which is equivalent to the total number of employees of these four companies at the end of 2019 About 26%.

Lufthansa previously stated that because more than 90% of its passenger aircraft are grounded, the company now loses about 1 million euros per hour. The loss in the first three months of this year is as high as 1.2 billion euros, and the loss in the following quarter There will be more, and Lufthansa's cash reserves can only be maintained for about half a year.

Lufthansa Chairman Shi Boer mentioned in late April that the company’s fleet may be reduced by one hundred aircraft after the crisis. This will result in an additional 10,000 employees in the company. But Spor said he would do his best to keep more employees.

In addition, the largest airline in Europe, the Air France-KLM group, which is merged by Air France and KLM, currently loses about 25 million euros a day. It is said that the company's cash flow will be exhausted in June.

Britain Airways parent company International Aviation Group released a financial report on May 7, showing that since late March, the group's passenger traffic has decreased by 94%, most flights are grounded, and the group lost 1.68 billion euros in the first quarter. The group will undergo an internal reorganization, in which British Airways may lay off up to 12,000 employees.

Small-scale airlines also joined the ranks of layoffs. Scandinavian Airlines plans to lay off about 5,000 people; Hungarian Wizz Airlines lays off 1,000 people, accounting for nearly one-fifth of the total number of employees; Latvia Baltic Airlines lays off nearly 700 people.

There are also some airlines that are restructuring their business. In Addis Ababa, Ethiopian Airlines engineers have recently been busy revamping some of their aircraft.

"We have been converting passenger aircraft into cargo aircraft, and 20 aircraft have been modified." The company's cabin maintenance technician Rekik Tsegaye told aviation media Skift.

Government assistance and route recovery, or a glimmer of light

On April 14, American Airlines, Delta Air Lines and eight other airlines recently reached a rescue agreement with the US Treasury in principle, and a number of aviation operators will receive a total of US$25 billion in federal government assistance. Among them, American Airlines announced that it would receive US$5.8 billion from the US wage support program, of which US$4.1 billion is direct support and US$1.7 billion is in the form of loans.

In addition, Southwest Airlines announced that it would receive US$3.2 billion from the US wage support program, of which US$1 billion is in the form of loans. Delta Air Lines also said it will receive $5.4 billion in salary support. In addition, as an additional condition for receiving this bailout, American Airlines agreed to restrict stock repurchases, dividends, and executive compensation.

However, the US government requires that the bailout will include not less than 30% of low-interest loans, these loans need to be repaid by the airline within five years. In addition, one of the conditions of the assistance plan is to prohibit airlines from laying off employees, compulsory leave or salary reduction. However, executives of multiple airlines bluntly stated that since the ban will be lifted on October 1, about 750,000 pilots, flight attendants, baggage porters and mechanics and other aviation industry staff will be affected. There will be massive layoffs in the aviation industry, and it is estimated that one-third of jobs will be laid off.

The Danish and Swedish governments recently announced a loan guarantee of approximately US$300 million to Nordic Airlines. Air France KLM Group also announced in April that it has received a total of 7 billion euros in state support loans, with conditions related to economic, financial and environmental commitments. For example, by 2024, Air France KLM's carbon emissions will be reduced by half compared to 2019.

The conditions for aid prepared by the German Federal Government and the European Union for Lufthansa are even more demanding. The German government and related banks will provide a total of 8.7 billion euros in loans to Lufthansa. In exchange, the German government will hold 20% of Lufthansa Group’s shares in the future. If another investor tries to merge with Lufthansa Group, the government’s equity stake can be increased to 25% To prevent the Lufthansa Group from falling into the hands of foreigners. The EU also specifically requested Lufthansa to give up part of the share of lifts at Frankfurt and Munich airports, and the take-off and landing of these two airports accounted for two-thirds of Lufthansa.

Lufthansa Group rejected this plan on May 27, but eventually had to bow to reality. On June 1, the German Lufthansa Group Supervisory Board approved this rescue plan.

 Airline disinfects the interior of the aircraft and prepares to welcome passengers Airline disinfects the interior of the aircraft and prepares to welcome passengers

Financial assistance can only temporarily bail out. In the long run, airlines need to restore their profitability as soon as possible.

International Air Transport Association data shows that from the low of April 21 to May 27, the total number of daily flights worldwide rose by 30%, mainly due to the very low proportion of domestic travel (5.7% of demand in 2019). Although this upward trend has not changed the status of the air transport industry, as long as the epidemic does not show a second round of proliferation, it indicates that the air transport industry has bottomed out.

After June, some airlines in Europe and America have been seeking to resume flights gradually on international routes. Czech Airlines and Portuguese Airlines recently indicated that they will resume some operating routes. Lufthansa plans to resume more flights from June. Ethiopian Airlines lost $550 million between January and April, but Tewolde GebreMariam, the company’s chief executive, expressed his optimism to the media. SEKO Machinery also faced various problems after resuming work, but the road came out of people. If the majority of manufacturers have any needs or questions about the bright annealed stainless steel industrial welded pipe production line, please feel free to inquire.

"I think after the arrival of summer, the airline's business can be restored to 50%, because this is the traditional peak period, and people are tired of the blockade."

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Iris Liang
SEKO Machinery & Technology Co., Ltd
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