Major airlines make dramatic cuts and call for state bailouts | World news

Major airlines including British Airways, Ryanair, easyJet and Virgin Atlantic announced a dramatic scaling back of their operations on Monday, including cutting up to 80% of their services, grounding thousands of planes and calling for government bailouts to avoid bankruptcy.

The moves came as an aviation consultancy warned that the international airline industry will collapse within months, with the loss of hundreds of thousands of jobs, unless states worldwide inject billions of dollars of emergency funding to see it through the coronavirus “catastrophe”.

“By the end of May 2020, most airlines in the world will be bankrupt,” the Centre for Aviation said. “Coordinated government and industry action is needed – now – if catastrophe is to be avoided.

“As the impact of the coronavirus and multiple government travel reactions sweep through our world, many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants,” it added.

A slew of big airline groups announced route cuts and plane groundings on Monday, including American Airlines, United Airlines, SAS, Air France-KLM and Air New Zealand. Some airlines, including Ryanair, Europe’s largest short-haul airline, have said their entire fleets could soon be grounded.

Thousands of passengers left stranded abroad by cancelled flights are not being told that they are entitled to their rerouting costs, consumer groups have warned.

Normally when an airline starts cancelling, passengers are entitled to EU compensation of €250-€600 (£230-£550). However, where the cancellation is deemed to be an “extraordinary circumstance” – something outside the airline’s control, such as coronavirus – then the rules do not apply.

However, passengers stranded abroad by the cancellation in the EU – or due to travel home on an EU carrier – are entitled to rerouting, or to have their alternative travel costs refunded.

Thousands of air passengers have found themselves on the wrong side of cancellations – particularly in Spain but also in places such as Morocco and Poland. If your flight is cancelled, passengers can ask the airline to be rerouted on to an alternative flight, if that is possible, or to pay for a train or coach replacement.

This applies all flights that start in the UK, EU, Iceland, Norway or Switzerland or flights that arrive in these countries if you are flying on a UK/EU-based airline.

The airline does not have to pay if the passenger chooses instead to receive a refund of the return flight’s cost. If it is possible to get home, passengers are advised to take the rerouting option. Passengers making their own way home should keep all receipts and keep accommodation and other costs “reasonable”.

In practical terms, passengers are having to fend for themselves, as it is all but impossible to get hold of airlines. Passengers trying to call British Airways on Friday described how it was impossible to talk to anyone – and that was before Donald Trump extended the US flight ban to include the UK and Ireland.

The bigger problem may well be getting the airlines to pay up. They have been reluctant to pay rerouting costs in normal times, let alone in the current climate. Ultimately, it remains to be seen whether they will still be in business to pay out, given that many are saying they are unlikely to survive without state help.

As a result, some travellers will likely find themselves relying on travel insurance, where their policy allows for travel disruption.

This is mostly offered by better, more expensive policies. Where the passenger used their credit card to book the flight – directly – with the airline, they may be able to hold their card provider responsible for their extra travel costs – if the flight costs more than £100 – and the airline refuses to pay.

Ultimately, the UK government may have to step in to repatriate large numbers of Britons stuck in places such as the Canary Islands or Morocco, where alternative travel is near impossible.

Passengers on package tours are better protected. Ski customers in France on package trips should be repatriated by the tour operator – and if the firm ceases to exist because it goes bust, the Civil Aviation Authority. The CAA would have to fund emergency repatriation flights, under the terms of the Atol protection. It is a similar story for any cruise passengers stuck abroad.

Rory Boland, the editor of Which? Travel, said: “This is a difficult time for travel operators and airlines but too many people are being given no information at all or poor advice that could risk them being left hundreds of pounds out of pocket. Airlines and operators must ensure they are informing customers of how they will get people home and, where appropriate, how they can claim for additional costs they’ve incurred, such as overnight accommodation.”

Miles Brignall

Peter Norris, the chairman of Virgin Group, which is the majority shareholder of Virgin Atlantic, asked the UK government to provide £7.5bn of emergency state support to try to rescue the UK aviation industry.

Virgin Atlantic said it would cut 80% of flights by 26 March and ground 75% of planes. Its route from London Heathrow to Newark has been terminated with immediate effect. Staff have been asked to take eight weeks of unpaid leave.

In an internal memo, seen by the Guardian, Virgin Atlantic bosses told staff that from 26 March it would scale back to a “skeleton fleet of six aircraft” until May. That means the rest of its fleet of 45 planes will be mothballed.

Willie Walsh, chief executive of BA parent company International Airlines Group (IAG), said he was postponing his retirement to help steer the airline through the crisis. He was due to step down as CEO on 26 March.

“The situation is going to be quite dynamic in the next few weeks,” Walsh said. “There are many airlines out there who are severely stressed with little or no cash resources.” IAG said it would cut capacity by at least 75% in April and May.

Ryanair said on Monday it had cancelled 80% of its flights until May and said it had not ruled out a “full grounding of the fleet”as a result of the coronavirus crisis.

Norwegian Air said it was cancelling 85% of its flights and will temporarily lay off 90% of its staff – some 7,300 people. Scandinavian airline SAS is temporarily laying off 10,000 employees, or 90% of the workforce.

The US president has banned all flights to the US from Europe, including the UK and Ireland, for at least a month. Flight restrictions have also been put in place by dozens of other nations across Europe and the rest of the world.

Iata, the aviation trade body, had already estimated that the industry would lose up to $113bn in revenue as a result of the crisis. But that estimate was on 5 March – before the true scale of the Covid-19 crisis became apparent and governments acted to close the skies.

Share prices in virtually all airlines have collapsed by more than 50% since the coronavirus crisis struck Europe. Shares in IAG were down 25% to 260p at 2pm on Monday. The group’s shares are down more than 60% over the past month.

Len McCluskey, general secretary of the Unite trade union, has called on Boris Johnson to bailout the aviation industry to protect tens of thousands of jobs. “If you do not take urgent action to support the aviation industry in the UK,” he told the prime minister in a letter on Monday, “there is absolute certainty that tens of thousands of jobs will be put at risk, and the industry will be unable to resume effectively once this health crisis has passed.”

The package holiday company Tui has cancelled travel to almost all of its holiday destinations, as its shares collapsed by a further 23% on Monday. They have fallen from 977p on 17 February to 246p – a decline of almost 75%.

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“In this rapidly changing environment the safety and welfare of our guests and employees worldwide remains of paramount importance and thus Tui Group has decided, in line with government guidelines, to suspend the vast majority of all travel operations until further notice, including package travel, cruises and hotel operations,” a spokesman said.

“This temporary suspension is aimed at contributing to global governmental efforts to mitigate the effects of the spread of Covid-19.”

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