Local carriers seek government support amid coronavirus shutdown

Aviation Updates Philippines – Three of the Philippines' largest airlines are seeking government support as the travel disruptions caused by the COVID-19 pandemic could push them into bankruptcy.

SUPPORT NEEDED. The Philippines' three largest airlines are seeking support from the government as travel disruptions caused by the COVID-19 pandemic could cause them to collapse. Photo by Dirk Salcedo - PPSG/AUP.
In a letter dated March 25, the members of the Air Carriers Association of the Philippines (ACAP), which comprises of Philippine Airlines, Cebu Pacific, Philippines AirAsia and their subsidiaries, mentioned that they are seeking support in the form of a credit guarantee by the government to ease banks' aversion to lending to airlines, emergency credit lines to help fund six months of operations, a longer-term facility at attractive rates to allow airlines to restructure their debt to a manageable level, and the waiver of all navigational and airport charges for the rest of the year. 

"Given these extraordinary times where the survival of the domestic airline industry is at stake, ACAP member airlines urgently appeal to your good offices for timely government intervention which is indispensable (so that) Philippine aviation will have the capacity to resume its vital role of connecting people for trade, commerce, and tourism," ACAP said.

ACAP also mentioned that the deferment of airport and landing charges previously provided by the government is no longer enough, given that circumstances have dramatically changed for the worse since then.

The group, however, clarified that it is not seeking handouts to be shouldered by taxpayers. Rather, it is asking for easy access to capital needed to "restart and sustain continued viable operations".

"ACAP members assure the government that the financing intervention will be used for legitimate business stabilization purposes with the corresponding corporate governance in place," it added.

The letter was addressed to cabinet secretaries Arthur Tugade of the Department of Transportation, Carlos Dominguez III of the Department of Finance, Bernadette Romulo-Puyat of the Department of Tourism, Ramon Lopez of the Department of Trade and Industry, and Ernesto Pernia of the National Economic and Development Authority.

Due to a significant drop in demand as well as travel restrictions imposed by different countries as a result of the ongoing pandemic, all ACAP member airlines were forced to shut down their passenger operations until April 14, 2020, resulting in the cancellation of 30,000 cancelled flights and affecting around five million passengers.

Last month, aviation think tank CAPA - Centre for Aviation predicted that most of the world's airlines would be bankrupt by the end of May 2020, with cash reserves running low and fleets grounded. 

The International Air Transport Association, meanwhile, previously mentioned that the ongoing crisis could cause passenger demand in the Asia-Pacific region to drop by as much as 37% compared to 2019, resulting in $88 billion in revenue losses. It also said that it had already written to leaders of several countries in the Asia-Pacific region, including the Philippines, to support local airlines as they fight for their survival due to the COVID-19 pandemic.