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Embattled Asian and global airlines turning to state bailouts

Garuda and Singapore Airlines get aid as some governments make demands in return

 A Thai Airways plane is seen at Suvarnabhumi Airport in Bangkok on May 21. Airlines in Asia and around the world are increasingly seeking government support to survive.(Photo by Akira Kodaka)

NEW YORK/JAKARTA/LONDON -- With the coronavirus pandemic clearly set to continue pummeling the global economy for an extended period of time, airlines in Asia and around the world are increasingly seeking government support for survival.

As global demand for air travel remains in the doldrums with no quick rebound in sight, many airlines on the brink of going belly up desperately require such financial aid to prevent job losses and stay in business.

Combined revenues of the world's approximately 290 airlines will plunge by half in 2020 from last year according to an estimate by the International Air Transport Association. They are also projected to post net losses totaling a staggering $84.3 billion, one of the biggest amounts of red ink in history.

Global demand for air travel will not fully recover until 2024, according to the IATA. Thus, the fate of many airlines now depends on whether they will receive financial support from the government.

In the U.S., the world's biggest economy and which has reported the largest number of COVID-19 cases, carriers are considering additional restructuring steps. Airlines are bargaining with the government for additional funds to help them avoid massive job cuts.

American Airlines announced Tuesday it will lay off or involuntarily furlough 19,000 employees, or 14% of its workforce, on Oct. 1. In a similar move, Delta Air Lines will furlough 1,941 pilots, or 20% of its total, in October. United Airlines, meanwhile, has decided to furlough up to 2,850 pilots in the next few months.

"The one possibility of avoiding these involuntary reductions on Oct. 1 is a clean extension of the PSP," American Airlines Chief Executive Officer Dough Parker said in a letter to employees, referring to the federal government's, Payroll Support Program.

At the end of March, the U.S. government set aside $50 billion in grants and loans for airlines, including $25 billion to keep workers paid through September.

Now, U.S. airlines are announcing plans for massive job cuts in October because carriers that earlier accepted the $25 billion in aid are prohibited from shedding jobs through Sept. 30 as a condition for receiving it. Carriers are lobbying for another $25 billion to help them keep employees on the payrolls for six more months, through next March.

Beleaguered airlines are now claiming they will be forced to hand out numerous pink slips unless they receive an additional financial boost from the government.

In Congress, there is a bipartisan move to seek an extension of the aid package for airlines. But talks between lawmakers and the White House over a broad stimulus package to prop up the sinking U.S. economy are facing rough going. Some voices have proposed that President Donald Trump use his power to issue executive orders to settle the issue.

A number of other countries have also provided public funds to rescue the airline industry, which is not only part of essential transport infrastructure but can also be a major employer.

In Asia, the Indonesian government has unveiled a plan to provide 8.5 trillion rupiah ($580 million) for national flag carrier Garuda Indonesia. Jakarta and is currently in talks with the airline over how to provide the money. A senior Garuda executive has expressed hopes that a deal will be reached by November.

Singapore Airlines is raising funds to stay afloat through the sale of shares and convertible bonds to the airline's biggest investor, state-owned Temasek Holdings, which owns about 55% of the group. The Singaporean government is determined to save its airline industry, which accounts for 5% of the country's gross domestic product and is a point of national pride for many citizens of the tiny city state.

In some cases, public financial support for an airline is premised on the government's involvement in management. Germany, for instance, has acquired a 20% stake in Lufthansa in return for a 9 billion-euro ($10-billion) lifeline it threw to the troubled airline, which gives Berlin a big say over how the carrier is run.

Some countries, however, have decided against giving special favors to airlines given that a wide range of other industries are also mired deep in slumps or because of public opposition.

The U.K. has ruled out immediate direct aid to the aviation sector and Chancellor of the Exchequer Rishi Sunak has said that airlines must first tap all commercial avenues for raising funds. "The government is prepared to enter negotiations with individual companies seeking bespoke support as a last resort," he said.

That stance has forced British Airways to embark on sweeping efforts to slash costs, including pay cuts and suspending purchases of new aircraft, under a plan to eliminate up to 13,000 positions, or nearly 30% of its workforce.

Thai Airways International, meanwhile, initially expected to be rescued by the government through a taxpayer bailout but was forced to file for bankruptcy protection after the citizens came out against an injection of massive public funds into the airline.

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