Airlines Suffer a Shaky Start as Philippines Eases Lockdown

(Bloomberg) -- Airlines operating in the Philippines called for swifter and more aggressive government support as a stilted restart to flights this month has done little to bring in much-needed revenue.

Philippine Airlines Inc., Cebu Air Inc. and the local unit of AirAsia Group Bhd have only been able to fly about 10% to 15% of their flight schedules despite pent-up demand among stranded travelers and returning migrant workers, company officials said.

Lingering concerns over the novel coronavirus outbreak have kept half of regional airports closed, while others have restricted flights to only once a week, Philippines AirAsia Inc. Chief Executive Officer Ricardo Isla, said in an interview with Bloomberg News. Most of the Philippines’ Covid-19 infections are in the major travel hubs of Metro Manila and Cebu City.

Lengthy and changing local-government approval processes have forced last-minute flight cancellations, while jam-packed quarantine venues in the capital region have led to caps on international arrivals, said Jose Enrique Perez de Tagle, vice president of Philippine Airlines, which has resumed flights to the U.S., Canada, U.K., Australia and Japan.

“It’s a tedious process,” said Rosario Logarta-Lagamon, Cebu Air’s communications head. “We will not end the problem of stranded passengers if we do not add frequency today.”

Airlines across the world have been pushed to the brink as flights were grounded and countries shut borders to control the spread of Covid-19, prompting governments to throw a lifeline to the industry. The International Air Transport Association estimates the Philippines could take a $4.5 billion revenue hit from the pandemic and shed nearly 550,000 jobs this year.

The country’s Air Carriers Association is pinning its hopes on Congress passing a 1.3-trillion-peso ($26 billion) stimulus bill by August, which would offer credit guarantees, loan facilities and fee waivers for the airline sector. Providing access to capital is more urgent and less costly than a separate government proposal that would allow state lenders to invest in distressed firms, the group’s vice chairman Roberto Lim said.

“It takes time to organize the government’s financial institution, then subject the company to the due diligence and the valuation process,” Lim said. “That’s not the solution for liquidity, which is the problem today,”

While waiting for government support, Cebu Air is renegotiating with Airbus SE on the delivery of four new aircraft set for this year, and Philippine Airlines is reviewing whether it can postpone orders of seven to eight new aircraft initially scheduled for 2023, officials said. AirAsia Philippines’ initial public offering, meanwhile, is now unlikely in the next two years and its order of three to five aircraft will be postponed to 2021, Isla said.

“The more this is unattended, the bigger the damage to the industry,” Lim said.

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