Local airlines face ‘existential threat’ to survival — ACAP

MANILA, Philippines — The country’s biggest airlines admits they are “facing an existential threat to their survival” and as such, are in urgent need of government intervention to mitigate the impact of the coronavirus disease 2019 or COVID-19 pandemic to their operations.

The Air Carriers Association of the Philippines (ACAP), in a letter dated March 25, is requesting for government assistance to the airline industry in the form of relief on current working capital credit lines, emergency lines of credit for six months, longer term facility, and waiver of all navigational and airport charges.

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, Ernesto Pernia of the National Economic and Development Authority, and Ramon Lopez of the Department of Trade and Industry.

“ACAP member airlines are not seeking a ‘handout’ at the expense of Filipino taxpayers. Rather, what is being sought is ready access to working capital which is required to restart and sustain continued viable operations,” the group said.

“ACAP member airlines assure the government that the financing intervention will be used for legitimate business stabilization purposes with the corresponding corporate governance in place,” it said.

ACAP acknowledged the assistance in the form of reprieves on airport and landing charges that were earlier provided by the government, but said circumstances have since dramatically changed for the worse.

As such, it said the initial assistance on the deferment of navigational and airport charges is no longer enough.

All ACAP member airlines have shut down their passenger operations until April 14, translating to 30,000 cancelled flights and affecting almost five million passengers.

“With no revenue flow seen for the next several weeks or even months, ACAP member airlines will urgently need government intervention,” it said.  

Among the urgent government intervention local airlines are seeking is relief on current working capital credit lines, saying that banks have already tightened credit and cut off access to undrawn lines even without defaults on payments because of the COVID-19 crisis.

“We request government to provide a credit guarantee scheme (not cash) that guarantees the banking sector’s loans and credit lines, most of which are secured with collaterals, to remove its aversion to the poor credit risk of the airline industry under the present operating environment,” ACAP said.

To enable airlines and support industries to restart operations after the lifting of the enhanced community quarantine, the local carriers are also asking the government to provide access to emergency lines of credit to help fund six months of operations, or longer, if the crisis extends.

This is in order for the industry to remain viable until overall demand recovers, it said.

ACAP said a long term facility at attractive rates, or a guaranty facility, would enable airlines to restructure debt to a more manageable level and give them leverage to negotiate better terms from aircraft lessors, bankers and creditors.

It said the aftermath of the COVID-19 outbreak in the aviation industry is a serious concern for which its member airlines are preparing for with their respective recovery plans, and such long term facility would ensure a successful recovery plan.

ACAP is also asking the government for a full waiver of all navigational and airport charges, including airport office rentals and land leases until the end of the year.

Lastly, the group is also calling for uniformity in the implementation of aviation transport regulations in the entire country upon the lifting of the enhanced community quarantine to ensure a quick resumption of operations domestically.

“We are partners of the government in this fight against COVID-19 and the ACAP member airlines and all of their dedicated frontliners will be ready to serve the riding public upon resumption of operations. But as partners, our member airlines will need the government support requested for herein,” the group said.

ACAP is an association composed of Philippine Airlines, Cebu Pacific, AirAsia Philippines, PAL Express, and Cebgo.  

The International Air Transport Association (IATA) last week had also written to the heads of government of 18 states in Asia-Pacific, including the Philippines, to appeal for emergency support to airlines as they fight for survival due to the dramatic loss of air travel demand due to the COVID-19 outbreak.