Crash landing: Global air transport hit hard by virus

The International Air Transport Association (IATA) has estimated global airlines will lose $314 billion in 2020 revenues. (Reuters)
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Updated 29 May 2020

Crash landing: Global air transport hit hard by virus

  • The pandemic has led to the collapse of South Africa’s Comair and South African Airways (SAA)

PARIS: The coronavirus has battered the air transport sector by grounding planes, resulting in layoffs, bankruptcies and rescue plans.

The International Air Transport Association (IATA) has estimated global airlines will lose $314 billion in 2020 revenues. That’s a 55 percent dive compared to 2019, and air traffic will not bounce back until 2023, the IATA says.

Latin America’s largest airline LATAM, with over 42,000 employees, became the latest carrier to file for bankruptcy on May 26 in the US, under Chapter 11 protection, allowing it to restructure without pressure from creditors, just two weeks after Colombia’s Avianca, with 20,000 staff, did the same.

Cash-strapped giant Virgin Australia also collapsed on April 21, going into administration.

The airline had appealed for a Aus$1.4 billion ($930 million) loan, but the government refused.

The pandemic has also led to the collapse of South Africa’s Comair and South African Airways (SAA), the UK’s Flybe and four subsidiaries of Norwegian Air Shuttle in Sweden and Denmark.

Air Canada plans to lay off at least 19,000 employees. British Airways will shed 30 percent of its workforce, US Delta Air Lines will carry out 10,000 redundancies, while Scandinavia’s SAS will lay off 5,000 jobs.

The damage to the air sector extends beyond the airlines. US plane manufacturer Boeing has announced 16,000 layoffs. In the engine sector, US manufacturer General Electric and the UK’s Rolls-Royce have also slashed 12,600 and 9,000 jobs respectively.

German airline group Lufthansa, meanwhile, announced on May 25 it had struck a $9.9 billion rescue deal with the government, under which Berlin would become its main shareholder.

But two days later the airline group wavered, saying its supervisory board was currently “unable to approve” the deal over fears of over-harsh conditions from EU competition watchdogs.

Also in Germany, charter firm Condor, a subsidiary of bankrupt travel agency Thomas Cook, secured €550 million in loans, underwritten by the state.

France and the Netherlands have rushed to the rescue of Air France-KLM with a plan of between nine and €11 billion.

Most of the big American air companies have asked for support from a massive $2.2 trillion US stimulus package intended to help impacted industries, of which $50 billion is earmarked for the civil aviation sector.

Italy has decided to nationalize Alitalia.

Switzerland has guaranteed €1.2 billion in loans to Swiss and Edelweiss, two subsidiaries of Lufthansa.

New Zealand has loaned some NZ$900 million ($551 million) to Air New Zealand.

Dubai and Turkey have also announced that they will come to the aid of Emirates and Turkish Airlines, but have not yet provided figures.


Saudi Arabia strengthens position as world’s largest Islamic finance market

Updated 7 min 36 sec ago

Saudi Arabia strengthens position as world’s largest Islamic finance market

  • Moody’s anticipates a shift to more Shariah-compliant finance over the next 12-18 months as corporates and households increasingly use Islamic products
  • VP-Senior Analyst at Moody’s Ashraf Madani: A comprehensive set of Islamic finance regulations have spurred Saudi banks to issue sukuk

LONDON: Islamic financing in Saudi Arabia will reach around 80 percent of system-wide loans in the next 12-18 months according to a report from Moody’s.
That compares to 78 percent of loans in the Kingdom in 2019 and 70 percent in 2013, the credit ratings agency said in a report on Tuesday.
Moody’s anticipates a shift to more Shariah-compliant finance over the next 12-18 months as corporates and households increasingly use Islamic products, even as low oil prices and the coronavirus crisis cause economic challenges.
Saudi Arabia had total Islamic finance assets of $339 billion as of March 2020, leaving Malaysia in a distant second  place with $145 billion.
“A comprehensive set of Islamic finance regulations have spurred Saudi banks to issue sukuk, Islamic products are now listed on the main market, and an Islamic mortgage refinancing businesshas been established,” said Ashraf Madani, VP-Senior Analyst at Moody’s.
The industry will further benefit from increased government sukuk issuance, potentially rising foreign investment supported by more lenient entry rules and deepening capital markets, Moody’s said.
A wave of mergers and acquisitions across the region is also accelerating the penetration of Islamic finance.