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Airlines seek P 8.6B in monthly subsidy

As the airline industry, ground to a halt by the pandemic, prepares to restart operations, the country’s three largest airlines are seeking government assistance to cover wage subsidies, working capital and gateway charges.

MANILA, Philippines — The country’s three largest airline groups are asking lawmakers for financial aid of about P8.6 billion per month, including wage subsidies, as they prepare to restart operations amid uncertain demand.

Air Carriers Association of the Philippines (Acap), whose members have been bleeding billions of pesos after travel bans and the Luzon lockdown, appealed for aid during an online Senate hearing on Monday, saying it expected losses to continue through 2020.

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Philippine Airlines (PAL), Cebu Pacific and AirAsia Philippines and their affiliates comprise Acap.

The hearing, presided over by Sen. Grace Poe, was the maiden Senate proceeding held via online videoconference after the chamber adopted new rules in observing safety protocols amid the coronavirus pandemic.Acap’s request for financial aid consisted of P1.3 billion in wage subsidies, P6.8 billion in working capital and P500 million in navigational and airport charges paid to gateways around the Philippines, according to its vice chair, Roberto Lim.

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The gateways include Ninoy Aquino International Airport, Clark International Airport and Mactan Cebu International Airport.

Lim said the airline industry employed about 25,000 workers and supported thousands more when counting allied industries, such as the badly hit tourism sector.

The Acap official pointed to figures from the International Air Transport Association, which estimated losses from Philippine airlines and tourism at $4.48 billion, while job losses could reach 548,300 this year alone.

He said recovery would be slow as consumer confidence in air travel took a hit amid the coronavirus pandemic.

“The projection that local carriers have for this year is we will be able to resume only 20 to 30 percent of our original network in terms of capacity and destinations,” Lim said.

Physical distancing

Asked by Senate President Pro Tempore Ralph Recto how physical distancing that would reduce passenger load to 50 percent would affect the carriers, Lim replied the scheme would not be economically viable “because the minimum [passenger load] of airlines is 70 percent.”

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Acap raised the issue on financial support to the Department of Transportation, Department of Finance, Department of Tourism, Department of Trade and Industry and the National Economic and Development Authority in a letter dated March 25.

Calling the COVID-19 pandemic an “existential threat” to the aviation sector, Acap also asked the government for guarantees on debt, six-month emergency credit lines apart from long-term loans with low interest rates and a waiver on navigational and airport charges. These charges are currently being deferred.

PAL and Cebu Pacific have cut nearly 500 jobs since March. 1Aviation Groundhandling Services Corp., an aviation support company whose biggest client is Cebu Pacific, laid off 400 employees at the start of April.

The assistance is not a “handout at the expense of the Filipino taxpayers” but access to working capital, as airlines have ongoing expenses while main revenue streams have evaporated, Acap said in its letter.

Suspend fees

At the hearing, Poe said the government should consider suspending the collection of some of the mandatory fees imposed on airline companies to help them recover from the health crisis.

“We need to see a comprehensive proposal to ensure that any lifeline will be used directly to prop up the industry,” Poe told the Inquirer in a Viber message.

“We trust that any aid given to the airline industry will primarily support the Filipino workers and ensure that they remain employed as we get through this crisis,” she said.

Replying to a query from Recto, Lim lamented that prolonging the flight ban in major cities in the country would result in bigger losses for the aviation sector.

The Acap vice chair said different policies being implemented by local governments would add to the burden on the airlines since these could lead to a longer suspension of domestic flights.

“If we are to move to a scenario where the restrictions are going to be relaxed, we feel there are still other challenges because the [local governments] do their own risk assessment as to whether to open up their individual cities and municipalities to passenger flights,” Lim said. INQ

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