Government to aid struggling airlines but only to complement bank loans
Even as the government has already allowed the resumption of domestic and international flights since in June, PAL said it is currently operating less than 15% of its normal number of daily flights, reflecting depressed travel demand as the health crisis drags on.
Rudy Santos
Government to aid struggling airlines but only to complement bank loans
Ian Nicolas Cigaral (Philstar.com) - October 7, 2020 - 4:50pm

MANILA, Philippines — After initially rejecting any form of aid, the Duterte administration is now willing to assist the airline industry heavily battered by the pandemic, but not to the extent that the sector is asking.

“We are prepared to participate in assistance to the airline industry. But let me point out that whatever assistance we have or we are going to provide will be part only of the entire process,” Finance Secretary Carlos Dominguez III said in an online forum on Wednesday.

“The private sector banks have to cough up the majority of the assistance,” he clarified.

While with a caveat, the finance chief’s statement marked a softening of the government’s tough stance against directly rescuing industries whose business suffered from the health crisis. Airlines, for instance, were among the first to ask for a bailout, but were instantly rejected by economic managers.

Filing bank loans to remain afloat is something that has been explored, but Roberto Lim, executive director of Air Carriers Association of the Philippines (ACAP), said banks have been hesitant to lend for fears of not getting their money back with flights still highly restricted.

As a workaround, Lim said ACAP also requested for state credit guarantees to cover the outstanding debt of carriers, which Dominguez was likewise too hesitant to give. “The government is not in a good position to evaluate credit risks,” the finance chief said in the forum sponsored by the Philippine Chamber of Commerce and Industry.

On top of credit guarantees, Lim said airlines were also seeking direct government loans and waiving of regulatory fees like navigation charges. But even these forms of assistance were hardly granted nearly 7 months into the pandemic.

“As of today (Wednesday), some waivers have been given but no real major grant has been extended by the government,” Lim said. 

ACAP’s members include flag-carrier Philippine Airlines (PAL), as well as low-cost airlines Cebu Air Inc. and the local unit of Malaysia's AirAsia Bhd.

Just earlier this week, PAL announced plans to let go over a third of its 7,000 employees this quarter to survive, equivalent to roughly 2,400 people losing jobs. The flag carrier’s decision followed job cuts of as much as 25% of total workforce in Cebu Pacific last August.

In the first half of the year, Lim said the domestic aviation industry lost P30 billion in revenues due to travel bans and lockdowns, adding that demand “has not returned” despite some easing of restrictions last June.

“The industry has to shrink and lay off the pilots, cabin crew and technicians to stay afloat,” he said. “So what the airlines are saying is the government is the only party that will break this liquidity crisis.”

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