Airlines ask for state aid

29 March 2020 - 00:04 By ASHA SPECKMAN

The airline industry wants government aid to help it weather the loss of revenue or some companies may go bust after all aircraft were grounded for the three-week lockdown this week. Chris Zweigenthal, CEO of the Airlines Association of Southern Africa, said although the industry supported the national shutdown "it's going to have a devastating effect on the airline industry and the tourism industry in this country". "There is definitely going to be a need for assistance," he said, and this could be in the form of provision for costs, or the reduction of airport charges and other fees.The industry body did approach the government before the lockdown although its request may have been shelved in last- minute preparations for the shutdown. "We do know they [the government] are aware of the request," he said.But Zweigenthal, who said the industry would finalise the amount needed "within the next couple of days", also wants the state to ensure a way for each domestic airline to remain in business and a plan to get the industry and tourism "up and running" soon after the lockdown is lifted.However, due to the demand on the public purse, airlines may languish at the back of the queue. Dondo Mogajane, National Treasury director-general, said although he was unaware of a request by the airline industry, other sectors may have to be prioritised even after the lockdown period. "What if money is going to be needed to boost the health sector? That decision is not now, it's going to be much, much later if it needs to happen. But it will depend on the impact on the economy as a whole. It's too early days now."Domestic airlines are experiencing tough times with a decline in travel. SAA is the most affected and is in business rescue after accumulating losses of R26bn over six years. Siviwe Dongwana, one of the two business rescue practitioners, said on Thursday the practitioners had not approached the Treasury for funding to cover costs over the lockdown but had renegotiated payment with suppliers. Although liquidation looms if the business rescue is unsuccessful, Dongwana said: "As of today there is nothing that says our opinion around a reasonable prospect of rescue has changed." Aviation economist Joachim Vermooten said: "None of the domestic airlines would actually be able to survive unless there is state aid granted." The combination of being forced to ground planes, losses incurred to restart operations and a possible extension of the lockdown would be "too large for airlines to actually make it". Other governments globally had started processes to bail out their airlines, although "it's probably too early at this stage for South Africa to consider it", he said. But assistance will be necessary as the recovery period for airlines after an outbreak of a communicable disease is between six and seven months. This is according to research previously commissioned by the International Air Transport Association (Iata) after other disease outbreaks. In an open letter on Thursday, Iata pleaded with leaders of the G20, a group of major economies that includes SA, to encourage governments worldwide to give direct financial support, loans or loan guarantees and tax relief to airlines. It said airlines were taking strain from the pandemic and that the average two-month cash reserves held by airlines were being "rapidly exhausted". Iata itself has an estimated cash shortfall of $200bn (R3.5-trillion). There are 22 international passenger airlines that fly to SA and this week the nine that were hanging on until the last moment were forced to halt flights for the lockdown. SA's airline industry contributes about 3% to global air passenger volumes and revenue. Condor airlines, which had already stopped flying to SA, said on Thursday it was launching several special flights to return stranded Germans. Lufthansa and Qatar Airways said SA remained an important destination and they would monitor the situation to resume flying as soon as possible. David King, Cape Town Air Access project manager, said at a conservative estimate, international flights add more than R13m in direct tourism spending a week to the Western Cape's economy. "We are confident we will be able to quickly restore and even grow our network once the crisis is over," he said.

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