PH airlines book record P65B loss in 2020, plead for gov’t aid

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  • Philippine airlines reiterated their appeal for more government support as they reel from an estimated loss of P65 billion in 2020 due to the COVID-19 pandemic
  • The Air Carriers Association of the Philippines urged the Senate and executive branch  to “intervene in terms of loan guarantees which is the easiest way to address the liquidity issue”
  • Airlines have so far received only about P800 million in waived navigational fees
  • Flights are also currently only about 20% of their average levels pre-pandemic

After incurring an estimated record loss of P65 billion in 2020, Philippine airlines are reiterating their appeal for more government support as they try to recover from adverse effects of the COVID-19 pandemic.

Air Carriers Association of the Philippines (ACAP) executive director and vice chairman Roberto Lim, during a Senate hearing on March 17, reiterated the group’s request for government help in addressing liquidity issues.

“The Philippine aviation sector [has] been left alone to survive and been able to do so due to the dedication of their effective management and the dedication of their owners,” Lim pointed out.

He added that airlines had made the effort to retain their employees despite revenue losses “but given the fact that they have been left alone, really, it has been unavoidable to extend further the employment of all of their employees.”

For ACAP’s member airlines, about 33% or 5,000 of their total employees, have been retrenched or retired since last year.

ACAP members are comprised of AirAsia Philippines, Cebu Pacific, Cebgo, Philippine Airlines (PAL), and PAL Express.

Flights are also currently only about 20% of their average levels prior to the pandemic. As an example, there were only 3,000 flights in December 2020 as opposed to 13,392 flights in the same month of 2019. He said current Philippine levels are lower compared to those of neighboring countries where flights have resumed to about 50% to 80%.

Meager support

Lim noted that the industry has so far only received about P800 million in waived navigational fees under Republic Act (RA) No. 11494, or the Bayanihan to Recover as One Act.

In comparison, airline industries in neighboring countries in Asia and in Europe and the United States have been provided by their governments “a lot more cash support, loans and guarantees early on,” Lim said.

Since last year ACAP has been asking Congress for a long-term credit facility, working capital credit lines, credit guarantee arrangements, and temporary relief from navigational and airport charges to help airlines.

READ: PH air carriers appeal anew for hand up, not doleout

Lim urged the Senate and executive branch of government to “intervene in terms of loan guarantees which is the easiest way to address the liquidity issue.”

He said this is relevant to the proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery or GUIDE bill, which has already been passed on final reading in the Lower House and is currently being tackled in the Senate.

The GUIDE bill aims to strengthen government financial institutions’ capacity to provide needed financial assistance to micro, small, and medium enterprises and other strategically important industries, including transportation and storage.

“I cannot overemphasize the urgency of the plight of the aviation industry and we of course look forward to having this law as soon as possible and an expanded version to address the liquidity concerns of the industry,” Lim said.

Since the proposed law may take months to implement, Lim said another option is for the Department of Finance or state banks to provide airlines with loan guarantees “so that the private banks who are very skittish in lending more money to an injured industry will actually open the credit facility tabs.”

Survival at stake

Lim noted that the request for help in the airlines’ liquidity is for their long-term survival as “we really don’t know how long” the pandemic will stay and “recovery requires another set of resources.”

He noted that airlines “still continue to suffer difficult operating conditions,” particularly due to fragmented policies when it comes to domestic travel.

While airlines understand that the local government units have different conditions in their communities, Lim said this “has also led to a proliferation of policies and approaches” with varying documentation requirements and clearances and limits in the number of flights and passengers per week.

With COVID-19 cases surging again recently, the national government also recently limited for one month the number of inbound international passengers to the country’s main gateway.

Lim said that instead of artificially cutting down the airlines’ capacities, the solution is to apply risk management and provide more accommodation to quarantine passengers.

“Risk management is the game. It cannot just be prohibiting people to come into your country. It is really regulating them through layers of bio-security, from the protocols, health protocols that are strictly adopted by the airports and the airline sector,” Lim pointed out.

Culture of safety

He explained that “the aviation sector is uniquely positioned to deal with these safety issues because it has a strong safety culture that antedates the COVID because of the inherent risk of flying.”

“The culture of safety is already ingrained in the aviation sector because on a daily basis it deals with that risk, so we believe the aviation sector is in a better position to manage the movement of people,” Lim added.

Moreover, he noted that aircraft used by airlines are equipped with either an Environment Control System that continuously infuses fresh air across the cabin or High Efficiency Particulate Air filters that trap viruses, bacteria and other contaminants with 99.99% efficiency—the same technology used in operating rooms of major tertiary hospitals.

Lim also again noted that the aviation sector “is a catalyst of economic development,” providing about 3% share of the country’s gross domestic product (GDP) and has linkages to the travel and tourism industry, which have a 12% share of GDP.

Airlines also provide connectivity for trade and commerce, and have helped in times of crises such as in repatriating overseas Filipino workers and Filipinos stranded in foreign countries amidst the pandemic.

Asked when airlines foresee recovery, Lim said that based on the estimates of the International Air Transport Association, the global aviation industry will recover in 2023 or 2024.

This is, however, subject to various factors such as government policies and restrictions, the confidence of the traveling public, and the rate of success of vaccination programs.