Coronavirus: Future of airlines and airports

[Bald Rick]

Having checked, it seems the proposed joint venture deal involving Air France/KLM, Delta and Virgin Atlantic did not get implemented.
So Branson still has 51% and Delta 49% (Singapore sold its 49% share to Delta).

Mind you the BBC has just said Virgin Atlantic is to apply for a rescue package from HMG.
Meanwhile TUI Group has secured a €1.8 billion emergency loan from the German government.

It isn't, KLM/AirFrance walked away from the purchase, and Singapore sold their whole stake to Delta. Its 49% Delta and 51% Virgin Group.

And as Virgin Group ultimately pay their tax in the BVI, perhaps if multi-billionaire Richard Branson doesn't want to provide some liquidity they should be looking to the BVI for Government assistance.

My mistake, apologies. I trusted another website over Wikipedia!

 

[FQTV]

I wouldn't expect the Norwegian government to bail them out, given their fraught relationship (primarily due to Norwegian's appalling labour practices and tax dodging).

I’m afraid that the Norwegian government announced a £250m bailout for Norwegian Air Shuttle last week.

It’s arguably SAS that’s more likely to go first.

The Dutch Government is on record saying that KLM will not be allowed to fail.

If it comes to it, the French Government will probably force a demerger and prop up a New Air France to maintain colonial links. If they don’t address senior cabin crew still being on EUR110,000pa plus contracts, though, then it’ll be worse than Alitalia on its own.

 

[Bletchleyite]

Alitalia is another one that's basically toast. They would have failed a decade or more ago if the government hadn't kept propping them up. I doubt they'll be able to continue to do so given the state that the Italian economy is going to be in after a few months.

Alitalia has been nationalised.

 

[najaB]

Alitalia has been nationalised.

Oh, in the short term the government will keep them going. But the Italian financial situation wasn't great, and is hardly likely to be improved by the impending recession.

Alitalia isn't going to survive, at least not in its current form.

 

[Jozhua]

First things first, I absolutely love flying, love travelling. Had an absolute blast doing it. But the fact of the matter is that right now we must avoid it at all costs. In fact, countries should have closed their borders and cut flights much faster than they did.

Obviously it's not nice for people to be unable to travel, or be quarantined for two weeks upon arrival to their home country, but if we actually did this when cases begun to spike in Italy, we wouldn't be in this mess. It's more important to preserve the safety and freedom of people within the country, than people's right to travel to other countries without restriction.

I would agree. If there is one thing that should emphatically not go back to normal it is air travel. A return to 1990s-ish sanity would be very sensible and very welcome.

This is, I agree, sad for those who will lose jobs, but as long as we properly provide for them the loss of chunks of the industry is no disaster at all.

Probably so, but as I said I think international travel restrictions could be in place for 2 or more years because to restart it properly requires the virus to be gone (or just "going around" evolved into a less harmful version) from everywhere. Domestic life will be back to something-like-normal long before that.

This would be sensible, although I doubt the UK will do it. I don't want a flood of new cases from the US once it takes off there, or from wherever else fails to get it under control. Most of the time when people ask to close the borders to "protect" us, it's misguided, but in this instance, it would be exactly the right thing to do.

I suspect everyone will be. International travel will need to be reduced for much longer else it'll just come back in.

One holiday by air a year is about the 1990s level and is sensible in my book by the way.

That seems fair.

Personally, I'll be glad to just travel around my own city or the UK freely, or go to the shops. Genuinely starting to miss it.

Airlines I reckon will go bust before the end of 2020 -
Norwegian
Eithad
Alitalia
South African

I think Virgin, Ryanair & Easyjet will have a significant downsizing. I also think BA's short haul business will be massively simplified.

It will be interesting to see if airlines really want to invest in the 737 Max/777x or the A330neo family now. They might be able to pick up low hours previous generation aircraft cheaply rather than buy a brand new fleet of aircraft, especially if lots of aircraft are parked!

No way Eithad will go bust, there's oil money behind it. They may downsize though, but will never file for bankruptcy.

I have a feeling Boeing/Airbus will plough on as usual, trying to build aircraft for airlines that don't want them. It appears airlines are ditching older aircraft by the droves, but only because they already have replacements on order. They need to temporarily lose capacity for a year or so, early retirement is the perfect way to achieve this.

 

[krus_aragon]

Norwegian are toast

Is that something like French Toast?

 

[LAX54]

Branson, has pumped 250 million into V.Atlantic.

 

[najaB]

Is that something like French Toast?

It's what you make in the morning, after lighting a fire with the good Norwegian Wood.

 

[Mikey C]

The EU rules on state bailouts have been waived, so governments can rescue airlines if they choose too, and realistically this will happen. It would be bizarre if say Lufthansa was allowed to go bankrupt, with Alitalia and other basket cases being kept alive.

How it will affect the multinational nature of the airlines groups is an interesting question, what this crisis has shown is that decisions are very much being made on a national level, rather than via the EU.

 

[Bletchleyite]

Indeed, BA is half Spanish so how that works will be interesting. Maybe it will be demerged and nationalised if things get bad for it?

 

[Meerkat]

Apart from politicians ego around flag carriers are there any good reasons for nationalising airlines?
Maybe tax revenue if you think you have a basically profitable airline which could lose out to other countries’ subsidised airlines.
How many jobs would be lost if Virgin went pop and was replaced by foreign carriers - would they all staff everything from their own end?

 

[najaB]

Indeed, BA is half Spanish so how that works will be interesting. Maybe it will be demerged and nationalised if things get bad for it?

Pedantic, I know, but British Airways is a British company - its registered office is in Harmondsworth. It is wholly owned by International Airlines Group, which is a Spanish registered company. So, in the worst case, IAG would be dissolved and the constituent companies (BA, Iberia, Aer Lingus, Europa, Level, etc.) would be able to apply to their national governments for assistance.

But, as others have pointed out, IAG can pay all their expenses for over a year with the cash they have in the bank so we're a long way from this being reality.

 

[najaB]

Apart from politicians ego around flag carriers are there any good reasons for nationalising airlines?

Flag carriers have special legal status. For example, entry under the US Visa Waiver Scheme is only technically valid if you are travelling on a US carrier or the flag carrier of the country you travelled from (or it might be that you are a national of?). Of course, this requirement is normally ignored.

Edit: Of course, there's nothing that requires a flag carrier to be state owned, many are not. Virgin Atlantic, for example, made a point of including the Union Flag in their livery as part of their quest to be generally recognised as a UK flag carrier airline (indeed as the flag carrier during BA's World Tails era).

 

[FQTV]

Branson, has pumped 250 million into V.Atlantic.

He hasn't.

He has said that he will 'support' Virgin Group Companies up to £250m, so this is everything from mobile 'phones to cruises to space travel to airlines.

This could mean that he buys assets out of the businesses, say property etc., and then mortgages it back to the group company. The purchase may be at below book or market value, depending on how desperate the company is.

 

[najaB]

Airlines I reckon will go bust before the end of 2020 -
Norwegian - Almost guaranteed.
Eithad - Possible. Though of the ME3 I think Qatar is in a worse state.
Alitalia - Pretty likely. Expect to see (another) "new Aliatlia" though.
South African - They were just barely holding on before the crisis. I can see them emerging as a short-haul airline serving the south of the continent.

I think Virgin, Ryanair & Easyjet will have a significant downsizing. I also think BA's short haul business will be massively simplified.

I'm not sure EasyJet/Ryanair will downsize, as much as have their future summer network look more like their current winter network. So expect any expansion plans/new bases to be put on temporary hold.
Virgin Atlantic is one that I'm not so sure about, their finances weren't looking so healthy before the current downturn.
BA has a fair number of corporate contracts so I think the core network will probably look about the same, maybe slightly lower frequencies.

 

[Tetchytyke]

I’m afraid that the Norwegian government announced a £250m bailout for Norwegian Air Shuttle last week.

Did they? I even checked before my comment, I must have missed it. All I could find was reference to SAS getting US$300m help from Denmark and Sweden.

Flag carriers have special legal status. For example, entry under the US Visa Waiver Scheme is only technically valid if you are travelling on a US carrier or the flag carrier of the country you travelled from

I can't find any reference to this anywhere, are you sure?

Virgin Atlantic, for example, made a point of including the Union Flag in their livery as part of their quest to be generally recognised as a UK flag carrier airline (indeed as the flag carrier during BA's World Tails era).

That was just Virgin trying to score cheap points against BA.

No way Eithad will go bust, there's oil money behind it. They may downsize though, but will never file for bankruptcy.

True enough. Abu Dhabi seem to have given up trying to outdo Dubai, so Etihad will probably contract more. But the likes of Gulf Air and Qatar Airways will go bump long before Etihad would.

 

[Meerkat]

Qatar wouldn’t be allowed to go bust would it, for ego/national pride reasons?
Don’t they do a fair amount of stuff in support of the Qatari’s nefarious interventions around the whole MENA area?

 

[najaB]

I can't find any reference to this anywhere, are you sure?

It's in the FAQ:

You are eligible to apply for admission under the Visa Waiver Program (VWP) if you:

• Arrive via a Visa Waiver Program signatory carrier

Certainly in the past, only recognised flag carrier airlines were eligible to be signatories. I fell foul of this when I wanted to travel from Barbados to the USA on my British passport. I wouldn't have been allowed to enter under the Visa Waiver program had I flown with Caribbean Airlines (or it might still have been BWIA at the time) since they weren't a signatory airline. Some research showed that, again at the time, only recognised flag carriers were allowed to be signatories. This was a while back though (twenty-something years) so things may well have changed.

 

[Tetchytyke]

Certainly in the past, only recognised flag carrier airlines were eligible to be signatories.

It seems to be a lot more relaxed now, even budget airline La Compagnie are signatories now. I imagine Open Skies changed a lot.

 

[FQTV]

Did they? I even checked before my comment, I must have missed it. All I could find was reference to SAS getting US$300m help from Denmark and Sweden.

It was well over a week ago, and widely-reported. For example in The Telegraph (though with an odd URL for the online article, which must have been overwritten on to an original story about easyJet):

Stricken airline Norwegian has been handed a bailout by its government of up to 3bn krone (£250m) as it grapples with the fallout from the coronavirus pandemic.

The carrier - the third-biggest player at Gatwick Airport - had been teeetering on the brink of collapse for weeks since the coronavirus outbreak derailed a turnaround plan to pay down debts and return it to profitability.

Boss Jacob Schram said: “We are very pleased that the Norwegian government has announced measures focused on aviation in response to the immense financial strain that has been placed on the global industry due to the spread of coronavirus.

https://www.telegraph.co.uk/busines...nes-will-go-bust-without-westminster-bailout/

True enough. Abu Dhabi seem to have given up trying to outdo Dubai, so Etihad will probably contract more. But the likes of Gulf Air and Qatar Airways will go bump long before Etihad would.

There's absolutely no chance that Qatar will go bust. None. It's backed by the Sovereign Wealth Fund and has very strong commercial links with a much wider aviation network. They've already survived effective aviation ostracisation by surrounding Arab states, and they plough on. They've also engendered quite a bit of consumer loyalty in the last few weeks by being one of the most pro-active carriers in helping passengers change, refund, repatriate etc.

Gulf Air has apparently been a basket case for years, but it also has very complex backing. It's critical to the Saudis for example, so there's far more to it than just being a feeder to and from Bahrain.

Etihad is the national airline of the United Emirates; Emirates is not. Etihad means 'United' in Arabic, as an aside. The Etihad/Emirates relationship is already very complex and opaque, so I wouldn't take a position on any particular outcome for either.

Etihad is, nominally, a lot more transparent in its operational performance than Emirates is, but going right back to the last financial crash, there was reportedly a lot of behind-closed-doors work to stop the Emirate of Dubai from going bust. Some may remember just how crippled Dubai was at the time, with folks fleeing and abandoning cars in parking lots near the airport as payments to Islamic banks couldn't be made and they needed to high tail.

One of the things that was suspected at the time, and may or may not be true (see the opacity above) is that the emirate of Abu Dhabi (which has the oil) bailed out the emirate of Dubai (which has an airline and a lot of skyscrapers). It's never got beyond rumour, but it is a persistent one that Emirates Airline is de facto now owned to a greater or lesser extent by the emirate of Abu Dhabi. If that's true, then a decision was presumably taken to retain both the Etihad brand and the Emirates brand, and if the same thinking prevails, then lots could go on in the background again, and the outside world would continue to see no difference.

 

[najaB]

It seems to be a lot more relaxed now, even budget airline La Compagnie are signatories now. I imagine Open Skies changed a lot.

I can believe that - I wasn't sure if they allowed other airlines to be signatories, or just 'ignored' that requirement.

 

[Bald Rick]

Indeed, BA is half Spanish so how that works will be interesting. Maybe it will be demerged and nationalised if things get bad for it?

Pedantic, I know, but British Airways is a British company - its registered office is in Harmondsworth. It is wholly owned by International Airlines Group, which is a Spanish registered company. So, in the worst case, IAG would be dissolved and the constituent companies (BA, Iberia, Aer Lingus, Europa, Level, etc.) would be able to apply to their national governments for assistance.

But, as others have pointed out, IAG can pay all their expenses for over a year with the cash they have in the bank so we're a long way from this being reality.

Indeed. BA is anything but half Spanish. There is a special share arrangement which means U.K. shareholders will always retain majority voting rights (and therefore control) even if U.K. share ownership is lower than 50%. On top of that it is 20% owned by the Qataris, and 15% (at least) by American institutions.

He hasn't.

He has said that he will 'support' Virgin Group Companies up to £250m, so this is everything from mobile 'phones to cruises to space travel to airlines.

This could mean that he buys assets out of the businesses, say property etc., and then mortgages it back to the group company. The purchase may be at below book or market value, depending on how desperate the company is.

I’m hearing from senior people in Virgin Atlantic that he has promised to support the airline through this, and come out the other side. Let’s face it, he’s worth a few bob, there’s nowhere to spend it in coffins, and without Virgin Atlantic the group loses a lot of its prestige.

 

[Meerkat]

What is Branson’s worth made up of?
If it’s investments then the very thing that means some think he should cough up might mean he doesn’t have the ready cash to do so.....

 

[FQTV]

I’m hearing from senior people in Virgin Atlantic that he has promised to support the airline through this, and come out the other side. Let’s face it, he’s worth a few bob, there’s nowhere to spend it in coffins, and without Virgin Atlantic the group loses a lot of its prestige.

It's a dreadful situation to be in for employees, and it's potentially understandable that they'd hope against hope that what he might be saying would be true.

However, Virgin Atlantic will push for a government bailout shortly, and almost certainly won't get it. Delta's wishes can't be ignored, and without Delta there is almost no hope of Virgin Atlantic ever having a sustainable future. Whatever Sir Richard says, the way that the industry is going is consolidation. Virgin Atlantic has never been profitable in any meaningful way; historically they've ridden things out by filling 'planes up with Virgin Holidays customers and managed the accounting internally.

Anything to keep the brand aloft.

Singapore Airlines tried for years to sell their 49% until Delta finally stepped up. Singapore realised quite soon that the brand is not what Sir Richard believes that it is.

When Alaska Airlines bought Virgin America, they understood enough about their own operations that they could proceed to erase the Virgin brand from the acquired business without undue concern.

When the Virgin brand was removed from the East Coast railway franchise, passengers didn't flee as the glamour of the brand was removed from their train ride.

Virgin is everything to Sir Richard, but it really isn't much in terms of any industry and certainly any nation.

He had the opportunity to create something really credible and powerful as a second force in UK aviation had he combined with Sir Michael Bishop at British Midland, but he didn't - and then maintained his default position of carping. The industry always felt that the egos were too large, and also that some of Sir Richard's underlying personality traits were incompatible with Sir Michael's position.

Ultimately, Sir Richard is a great self-publicist and plays the role of hard done-by underdog in a sweater with unwavering dedication, but I personally don't even believe that he's very good at branding, a stake through the heart to him as that suggestion would be.

Brands aren't universally-versatile; they usually have very defined applications and the power of them is maintaining focus on the product or service. Sir Richard focuses on the brand and himself, and has been personally very successful - but I'd posit that few Virgin branded businesses will outlive him. Possibly the UK media businesses being the only ones that might cling on to the name.

A lot is speculation, of course, but the vital signs for Virgin Atlantic are not considered by many (if any) that I talk to in the industry to be good.

 

[Bald Rick]

It's a dreadful situation to be in for employees, and it's potentially understandable that they'd hope against hope that what he might be saying would be true.

However, Virgin Atlantic will push for a government bailout shortly, and almost certainly won't get it. Delta's wishes can't be ignored, and without Delta there is almost no hope of Virgin Atlantic ever having a sustainable future. Whatever Sir Richard says, the way that the industry is going is consolidation. Virgin Atlantic has never been profitable in any meaningful way; historically they've ridden things out by filling 'planes up with Virgin Holidays customers and managed the accounting internally.

Anything to keep the brand aloft.

Singapore Airlines tried for years to sell their 49% until Delta finally stepped up. Singapore realised quite soon that the brand is not what Sir Richard believes that it is.

When Alaska Airlines bought Virgin America, they understood enough about their own operations that they could proceed to erase the Virgin brand from the acquired business without undue concern.

When the Virgin brand was removed from the East Coast railway franchise, passengers didn't flee as the glamour of the brand was removed from their train ride.

Virgin is everything to Sir Richard, but it really isn't much in terms of any industry and certainly any nation.

He had the opportunity to create something really credible and powerful as a second force in UK aviation had he combined with Sir Michael Bishop at British Midland, but he didn't - and then maintained his default position of carping. The industry always felt that the egos were too large, and also that some of Sir Richard's underlying personality traits were incompatible with Sir Michael's position.

Ultimately, Sir Richard is a great self-publicist and plays the role of hard done-by underdog in a sweater with unwavering dedication, but I personally don't even believe that he's very good at branding, a stake through the heart to him as that suggestion would be.

Brands aren't universally-versatile; they usually have very defined applications and the power of them is maintaining focus on the product or service. Sir Richard focuses on the brand and himself, and has been personally very successful - but I'd posit that few Virgin branded businesses will outlive him. Possibly the UK media businesses being the only ones that might cling on to the name.

A lot is speculation, of course, but the vital signs for Virgin Atlantic are not considered by many (if any) that I talk to in the industry to be good.

I’m still firmly in the camp that it will disappear - to the great distress of a very close friend - but she remains hopeful and reassured.

 

[najaB]

I’m still firmly in the camp that it will disappear - to the great distress of a very close friend - but she remains hopeful and reassured.

I think it will survive, but not as is. A smaller, leaner airline focused on London to US east coast cities. Maybe one or two routes to the west coast.

 

[Tetchytyke]

What is Branson’s worth made up of?

I would be astounded if all four billion is in illiquid assets and, even if it is, using those illiquid assets as security would allow VS to access lines of credit.

I personally don't even believe that he's very good at branding, a stake through the heart to him as that suggestion would be.

I think it's fair to say he was very good at branding, but it's a heck of a lot harder to market yourself as the disruptor sticking it to The Man when you're worth four billion quid and you sued the NHS because you lost a tender.

 

[Mikey C]

30 years ago Branson could play the roll of the funky outsider, battling against the establishment, I'm not sure that schtuck works so well now. Especially as the in flight experience on Virgin Atlantic (in economy anyway) hardly stands out nowadays

 

[FQTV]

I’m still firmly in the camp that it will disappear - to the great distress of a very close friend - but she remains hopeful and reassured.

I do hope that she's OK, and although it'll be highly upsetting, there will, I'm sure be other opportunities with strong carriers in future - indeed something will have to be done about UK regional flying fairly soon, so maybe a completely new company needing good folks will emerge shortly.

I think it will survive, but not as is. A smaller, leaner airline focused on London to US east coast cities. Maybe one or two routes to the west coast.

Unfortunately, there's no way that that would be even vaguely profitable. Virgin has next to no feed at the London end (a tiny bit from Dubai and Tel Aviv connecting, but in the scheme of things nothing), and therefore it's critical that it has Delta feed on the other side.

From the Delta point of view, what's the benefit of the additional costs of branding, separate sales teams, separate operations at Heathrow T3 etc., etc? It's fundamentally inefficient and against the (some would say) brutally efficient IAG and the others who'll prevail, it's hopeless.

If the brand survives, then I'd say that it'll be flying Jumbos from Gatwick and Manchester to Cancun and Florida, as the airline arm of Virgin Holidays. That's the only part of the business that's ever had a niche; everything else has been high-cost, low-frequency, largely origin and destination business that just doesn't pay, but blustered with pictures of the odd Spice Girl flying twice a year to LA in Upper Class (and encouraging them to call it First when it's nothing of the sort) and the eminently Instagrammable but crippling expensive to operate Clubhouse at Heathrow Terminal 3.

As I say; they had their one chance with British Midland.

 

[telstarbox]

How is flying people between the UK and USA on a non budget airline not profitable?