Coronavirus: Airlines handed $715m bailout

The federal government has pulled together an airline assistance package as the industry faces unprecedented challenges.

A Qantas Boeing 737-800 taxis to the terminal at Sydney Airport. Picture: AAP

Faced with the prospect of Australia’s national carrier being pushed to the brink of collapse in its ­centenary year, the federal government has pulled together an airline assistance package worth $715m.

The package, to be backdated to February 1, will see airlines ­reimbursed for government-­imposed charges, such as Airservices Australia fees, fuel excise and regional aviation security charges, until April 30.

An initial $159m will be paid immediately in recognition of the unprecedented challenges facing the industry due to travel restrictions put in place to limit the spread of the coronavirus.

Qantas CEO Alan Joyce ­declared the crisis the “single biggest shock aviation has ever ­experienced” as he announced a 90 per cent cut to international ­capacity and a 60 per cent ­reduction in domestic flying.

The cuts would affect all of Qantas and Jetstar’s 30,000 ­employees and ground the equivalent of 150 aircraft, more than half the group’s fleet. The tipping point was the new requirement for anyone arriving in Australia from overseas to self-isolate for 14 days, which virtually killed off any ­remaining demand for travel.

Advice from the federal government to practise social distancing and limit travel was also taking a toll on domestic demand, Qantas said. In a note to staff, Mr Joyce said there was significant hardship ahead but his goal was “to protect as many jobs as possible and ­remain strong enough to ride this out”.

After earlier hinting the government would do what was necessary to ensure the aviation industry remained viable, Deputy Prime Minister Michael McCormack announced the ­assistance package late on Tuesday. It followed the Qantas ­announcement and a desperate appeal from Regional Express Airlines for significant assistance in the face of almost certain financial collapse.

“Our airlines run on tight budgets at the best of times and these past few weeks have been particularly tough,” Mr McCormack said. “Providing this assistance not only helps our airlines but also the ­entire aviation industry, regional Australians in particular, and other industries such as tourism and trade.”

A Virgin Australia spokesman welcomed the assistance but indicated further capacity cuts were being planned, with an announcement expected as early as Wednesday. But in the strongest indication yet that the government would not stand by and watch the Qantas competitor sink, Tourism Minister Simon Birmingham said a strong airline sector in Australia was “not negotiable”.

“There are uncertainties ahead in terms of the depth and duration and scale of the crisis that we face,” he said. “That’s why government will continue to work with the airlines. We have to make sure they are not only strong today but strong in the long term.”

He said airline operations in ­regional Australia were being monitored, after the plea from Rex. The carrier went into a trading halt on Tuesday ahead of a market announcement on Thursday, expected to reveal a 25 per cent cut to capacity. In a letter to Mr McCormack, COO Neville Howell highlighted the collapse of UK regional carrier Flybe, and warned Rex would not survive the next six months without significant assistance. “If regional carriers collapse, so will many regional communities for which the air service is their lifeline,” he wrote.