Local air carriers seek gov't aid as sector face ‘existential threat’ due to COVID-19

The Air Carriers Association of the Philippines (ACAP), comprised of the country’s leading local airlines, is seeking the financial intervention from the government as the local aviation sector’s survival is in peril due to the disruption of air travel brought by the COVID-19 pandemic.

“The Philippine carriers are facing existential threat to their survival which is faced by other airlines in the region and in other parts of the world,” ACAP said in a letter dated March 25 to Transportation Secretary Arthur Tugade, Finance Secretary Carlos Dominguez III, Tourism Secretary Bernadette Romulo-Puyat, Socioeconomic Planning Secretary Ernesto Pernia, and Trade Secretary Ramon Lopez.

ACAP counts as members Philippines AirAsia Inc., Cebu Air Inc., Cebgo Inc., Air Philippines Corp. (PAL Express), and flag carrier Philippine Airlines Inc.

In its letter, the local carriers cited the Center for Asia Pacific Aviation’s (CAPA) forecast that the by the end of May most airlines will be bankrupt due to COVID-19.

ACAP said its members have already shutdown passenger operations until April 14, 2020 due to the Luzon-wide enhanced community quarantine, translating to 30,000 canceled flights and affecting five million passengers.

With no revenue flow seen in the next several weeks, local carriers seek relief on current working capital credit lines.

“We request the government to provide a credit guarantee scheme (not cash) that guarantees the banking sector’s loans and credit lines, most of which are secured under collaterals, to remove its aversion to the poor credit risk of airline industry under the present operating environment,” ACAP said, noting that banks have cut off access to credit because of risk aversion due to the COVID-19 threat.

“It cannot be overemphasized that only the government is in position to manage the extraordinary situation facing the industry where its ability to generate revenue has been frozen,” it said.

Local airlines also sought for emergency credit lines for six months.

“To enable airlines and support industries to restart operations after the lifting of the enhanced community quarantine, we ask the government to provide access to emergency lines of credit to help fund six months of operations, perhaps longer if this crisis is extended, in order for the industry to remain viable until overall demand recovers,” ACAP said.

“In addition, we request that upon lifting of the ECQ hopefully by April 14, uniformity in aviation transport regulations would be implemented in the entire country and that LGUs (local government units) be mandated to align with National Government. This is essential to ensure a quick resumption of operations at least domestically,” it said.

ACAP is also asking the government for a long-term facility.

“To ensure a successful recovery plan, however, a long-term facility at attractive rates or a guarantee facility would enable airlines to restructure debt to a more manageable level and give them leverage to negotiate better terms from aircraft lessors, bankers, and creditors,” the air carriers group said.

The local airlines sought a waiver of all navigational and airport charges.

“ACAP member airlines respectfully request for a full waiver of all navigational and airport charges, including airport office rentals and land leases until the end of December 2020,” it said.

ACAP clarified, in its letter, that it is not seeking a “handout” at the expense of Filipino taxpayers, rather a ready access to working capital required to restart and sustain operations.

“ACAP member airlines assure the government that these financing will be used for legitimate business stabilization purposes with the corresponding corporate governance in place,” it said. —LDF, GMA News