BRUSSELS (Reuters) – The European Union’s competition watchdog on Monday approved French state aid worth 7 billion euros ($7.66 billion) for Air France <AF.PA>, saying the support would provide cash to soften the economic shock of the coronavirus pandemic.
Airlines across Europe have sought state rescues as coronavirus lockdowns have forced them to ground their fleets for more than a month, with no end in sight.
“This 7 billion euro French guarantee and shareholder loan will provide Air France with the liquidity that it urgently needs to withstand the impact of the coronavirus outbreak,” the EU’s top competition official Margrethe Vestager said in a statement.
The European Commission noted the importance of Air France, with more than 300 planes, to the French economy and the role it has played in repatriating stranded citizens and transporting medical supplies.
The Commission said in its statement that the support will take the form of a state guarantee on loans and a subordinated shareholder loan to the company by the French state.
The French and Dutch governments each hold close to 14% of the Air France-KLM group, which was created by the 2004 merger between the two national carriers.
(Reporting by Gabriela Baczynska and Robin Emmott, editing by Ed Osmond and Barbara Lewis)
FILE PHOTO: Air France airplanes on the tarmac at Paris Charles de Gaulle airport in Roissy-en-France
OSLO (Reuters) – Norwegian Air <NAS.OL> shareholders backed its financial survival plan on Monday, with more than 95% of votes cast supporting the conversion of nearly $1 billion of debt into equity and raising more cash from its owners.
Approval of the scheme is a vital part of the struggling airline’s plan to tap government credit guarantees as it seeks to overcome the coronavirus crisis, which has compounded its already deep financial problems.
Airlines around the world have been hit hard by the impact on travel of the pandemic, with many forced to turn to governments for state aid to avoid bankruptcy.
The airline, which at the end of last year had amassed debts of around $8 billion, said ahead of the meeting that it had won “strong support” from aircraft lessors for its plan.
With 95% of its fleet grounded due to the coronavirus pandemic, Norwegian Air has said it could run out of cash by mid-May unless shareholders supported the plan.
On Sunday it said bondholders had signed up to the plan, which was narrowly rejected in a vote on Thursday.
Norwegian Air said lessors are now willing to convert at least $730 million of debt into equity, up from $550 million earlier, and talks are ongoing for possible further conversion.
“With the significant contributions from lessors and bondholders, the company expects to convert more than 10 billion crowns ($958 million) in debt to equity,” it said.
Based on the results from the shareholders’ meeting, the company will now proceed with the conversion of bonds and lease debt to shares, as well as the public offering of up to 400 million ($38.4 million) from the sale of new stock, it said.
The debt conversion and share sale will allow Norwegian Air to tap government guarantees of up to 2.7 billion crowns, which hinge on a reduction in leverage, on top of 300 million crowns it has already received.
The plan will hand majority ownership to the airline’s creditors and could leave current shareholders with just 5.2%.
The loan could keep Norwegian Air going until the end of 2020, although further cash may be needed as it eyes a gradual ramp-up next year and normalisation in 2022, albeit with a reduced fleet.
Norwegian Air is only paying invoices vital to maintaining minimum operations, such as salaries for staff still employed and critical IT infrastructure. It has put payments for ground handling, debt and leases on hold.
The Oslo Bourse said it had halted trade in Norwegian Air’s shares until the outcome of the vote is presented.
(Reporting by Terje Solsvik; Editing by Christian Schmollinger, Jason Neely and Alexander Smith)
FILE PHOTO: A Norwegian Air plane is refuelled at Oslo Gardermoen airport
LONDON (Reuters) – Airbus <AIR.PA> will furlough around 3,200 staff at its Broughton factory in Wales, the European planemaker said on Monday after it warned staff that the coronavirus crisis had put its survival at stake.
Airbus has given its starkest assessment yet of damage from the crisis, telling the company’s 135,000 employees to brace for potentially deeper job cuts as it grapples with the impact of the COVID-19 pandemic on the aerospace sector.
Earlier this month, the group said it would furlough some 3,000 French workers by tapping a government-backed scheme for four weeks.
“Airbus confirms it has agreed with its social partners to apply the government’s Job Retention Scheme for approximately 3,200 production and production-support employees at its commercial aircraft site in Broughton,” it said in a statement.
Britain’s job retention scheme allows employers to furlough staff and claim cash grants up to 80% of wages, capped at 2,500 pounds per worker.
Airbus will top up gross salaries to bring pay up to 85-90% of pay, in accordance with an agreement signed with trade union representatives.
The deal affects the majority of the production and production support teams in Broughton, the north Wales factory which assembles wings.
Furlough periods will be staggered, with all starting in the next three weeks and lasting for at least three weeks.
The move does not affect Airbus’ 3,000 staff in Filton, western England, where wings are designed and supported.
(Reporting by Alistair Smout; editing by Stephen Addison)
FILE PHOTO: Airbus CEO Guillaume Faury poses before Airbus’s annual press conference on full-year results
By Tim Hepher
PARIS (Reuters) – European planemaker Airbus issued a bleak assessment of the impact of the coronavirus crisis, telling the company’s 135,000 employees to brace for potentially deeper job cuts and warning its survival is at stake without immediate action.
In a letter to staff, Chief Executive Guillaume Faury said Airbus was “bleeding cash at an unprecedented speed” and that a recent drop of a third or more in production rates did not reflect the worst-case scenario and would be kept under review.
Airbus said it did not comment on internal communications.
The letter was sent to employees late on Friday, days before the company is due to give first-quarter results overshadowed by a pandemic that has left airlines struggling to survive and virtually halted jet deliveries since mid-March.
Airbus has begun implementing government-assisted furlough schemes starting with 3,000 workers in France, “but we may now need to plan for more far-reaching measures,” Faury said.
“The survival of Airbus is in question if we don’t act now,” he added.
Industry sources have said a new restructuring plan similar to its 2007 Power8 which saw 10,000 job cuts could be launched in the summer, but Faury indicated the company was already exploring “all options” while waiting for clarity on demand.
People familiar with the matter say Airbus is also in active discussions with European governments about tapping schemes to assist struggling industries, including state-guaranteed loans.
It has already expanded commercial credit lines with banks, buying what Faury described as “time to adapt and resize”.
HONG KONG, April 19 (Reuters) – United Airlines will sell and lease back 22 planes to Bank of China (BOC) Aviation, a statement from the aircraft investor released to the Hong Kong Stock Exchange said on Sunday.
The deal involves six Boeing 787-9 aircraft and 16 Boeing 737-9 MAX aircraft from United Airlines, the statement said.
The Singapore-based BOC Aviation did not reveal how much the purchase was worth but said the planes would be leased back to United on long-term agreements.
United said on Wednesday it had reduced its flight schedule in May by 90% and expects similar cuts for June as a result of the coronavirus pandemic.
The U.S. airline also said it flew less than 200,000 people in the first two weeks of April, a 97% drop from the more than 6 million people it flew during the same time in 2019.
BOC Aviation, which focuses on aircraft leasing, has a fleet of 567 planes owned, managed or on order as at the end of March, the statement said
The transaction was finalised on Friday and the deal is expected to close later this year, the statement said.
(Reporting by Scott Murdoch. Editing by Jane Merriman)
SYDNEY (Reuters) – China Development Bank (CDB) Financial Leasing Co said on Monday it had agreed with Boeing Co <BA.N> to cancel the purchase of 29 undelivered 737 MAX jets, adding to a string of recent cancellations of the grounded airplane.
The model has been grounded globally for more than a year following deadly crashes in Indonesia and Ethiopia.
“In light of evolving aviation market dynamics, we’ve been working together with Boeing over many months to re-calibrate our MAX orderbook to be in line with our long-term view of the market and related opportunities,” Xuedong Wang, chairman of CDB Financial unit CDB Aviation, said in a statement.
The lessor said it retained an order for another 70 of the planes that also have yet to be delivered.
Boeing recorded a total of 150 MAX cancellations in March, including 75 from Irish leasing company Avolon. Boeing remains in talks with regulators seeking approval to return the plane to service, but its customers have also seen a sharp fall-off in demand due to the coronavirus pandemic.
Boeing said in a statement it continued to partner with leasing company customers to help them balance their portfolios in a challenging market.
“As we work to return the 737 MAX to service, our focus remains on addressing our customers’ fleet needs while optimising the delivery of the more than 4,000 airplanes in our 737 backlog,” it said.
“As market conditions normalise, Boeing anticipates that lessors who have restructured or reduced their orderbooks will continue to add MAX aircraft to their portfolios through sale leaseback agreements with airlines,” the planemaker said. “Longer term we expect these lessors will again place orders for direct MAX purchases.”
CDB Financial Leasing said that all 737 MAX 10 jets still on order will be switched to the smaller 737 MAX 8 model, and 20 deliveries will be deferred to dates in 2024, 2025 and 2026.
(Reporting by Jamie Freed; additional reporting by David Shepardson in Washington Editing by Tom Hogue and Muralikumar Anantharaman)
A Boeing 737 Max aircraft is seen parked in a storage area at the company’s production facility in Renton
FILE PHOTO: VW hosts photo workshop at Zwickau plant
FRANKFURT (Reuters) – German carmakers including Volkswagen <VOW.DE> and Mercedes-Benz <DAI.DE> will restart production at some German factories next week after the country eased restrictions designed to contain the coronavirus outbreak.
Chancellor Angela Merkel on Wednesday said that Germany has achieved a “fragile intermediate success” in its the fight against the coronavirus and that its emergence from lockdown would begin with the partial reopening of shops next week and schools from May 4.
Unlike Italy and Spain, Germany never banned car production, though factories came to a standstill after authorities restricted the movement of people and ordered the closure of car dealerships, hitting demand.
Volkswagen said it will start producing cars for its core brand in Zwickau, Germany, and in Bratislava, Slovakia, on April 20.
Plants in Russia, Spain, Portugal and the United States will ramp up production from April 27 onwards, joined by factories in South Africa, Argentina, Brazil and Mexico in May.
“With the decisions by the federal and state governments in Germany and the loosening of restrictions in other European states, conditions have been established for the gradual resumption of production,” Ralf Brandstaetter, Chief Operating Officer of the Volkswagen brand, said in a statement.
The carmaker has retooled production to ensure that workers keep 1.5 metres apart. Other measures include the staggering of shifts and lunch breaks, plus steps to change worker interaction in VW’s supply chain.
Bernd Osterloh, Chairman of the company’s Works Council, said: “In the light of the pandemic, we need to adapt our routines. One answer is our new agreement on health protection. With about 100 measures, we are keeping the risk of infection at Volkswagen as low as possible.”
In China, where a Volkswagen has already implemented health measures, 32 of the 33 plants have resumed production and no coronavirus infections among employees have been reported.
Mercedes-Benz parent Daimler said that its plants in Hamburg, Berlin and Untertuerkheim will resume production next week. Its Berlin plant makes engine-management systems for vehicles sold in China.
Production will initially start in a one-shift system, Daimler said, with plants in Sindelfingen and Bremen also making preparations to ramp up production.
(Reporting by Edward Taylor and Jan Schwartz; Editing by David Goodman)
(Reuters) – Boeing Co suppliers Hexcel Corp and Woodward Inc on Monday called off their planned all-stock merger as widespread travel bans to curb the coronavirus pummels demand in the aerospace sector.
The companies, which make and supply aircraft parts, had agreed to a merger in January in a $6.4 billion deal.
“Although we are disappointed with this outcome, we are confident this is the right decision for our customers, our shareholders, and our employees,” the companies said in a joint statement.
The market rout triggered by the coronavirus pandemic and the resulting economic downturn has thrown a wrench into corporate deal making. Last month U.S. printer maker Xerox Holdings Corp walked away from its $35 billion hostile cash-and-stock bid for HP Inc.
Boeing, which halted the production of its grounded 737 MAX aircraft in January, said on Sunday it would extend the suspension of production at its Washington state facilities until further notice.
Boeing is Hexcel’s second-biggest customer, accounting for a quarter of the company’s annual sales. Hexcel also supplies Airbus SE.
Woodward gets about 15% of its annual sales from Boeing, its biggest customer.
(Reporting by Ankit Ajmera in Bengaluru; Editing by Shounak Dasgupta and Devika Syamnath)
FILE PHOTO: A Malaysia Airlines plane is seen at Kingsford Smith International Airport in Sydney
KUALA LUMPUR (Reuters) – Privately held Golden Skies Ventures (GSV) has made a $2.5 billion offer to fully take over the holding company of ailing state carrier Malaysia Airlines, with financing from a European bank, its executives told Reuters on Monday.
GSV, which was set up by former Malaysia Airlines officials and professionals with aviation experience, made the proposal a month ago, as airlines around the world were hammered by travel restrictions following the coronavirus pandemic.
“We have secured in excess of $2.5 billion from the bank. We will take about three to four months to get the long-term financing,” Chief Executive Shahril Lamin told Reuters in a phone interview.
GSV said it also has a commitment from a Japanese private equity firm to inject immediate funds into the aviation group through an equity deal.
It declined to name the firms involved, adding it was in talks with other foreign banks and private equity firms for further funding.
GSV has submitted its proposal to Morgan Stanley which has been hired by the aviation group’s sole owner, sovereign wealth fund Khazanah Nasional Bhd.
Sources have previously said Japan Airlines Co Ltd, domestic carriers AirAsia Group Bhd and Malindo Air have shown interest in Malaysia Airlines.
GSV said it would assume most of the airline’s debt that is being held by the government in outstanding Islamic bonds.
Khazanah and Morgan Stanley did not immediately respond to emailed requests for comment.
GOLDEN SHARE
The proposal includes keeping the government’s so-called golden share which allows it majority voting rights and maintains Malaysia Airlines’ flag carrier status.
GSV expects it will have ample liquidity to help the airline operate comfortably for up to 18 months.
It intends to reinstate Malaysia Airlines as a premium long-haul airline by expanding its flight network and maximising utilisation of its 81-plane fleet. It also plans to keep other business units such as the budget airline, cargo freighter and maintenance repair and overhaul unit.
“It’s still a viable venture, it has inherent strengths. We are saying we won’t lay off the 13,000 frontline employees and we are not going to asset-strip the airline,” Deputy Chief Executive Ravindran Devagunam said.
The firm aims to achieve positive earnings before interest, taxes, depreciation and amortisation within three years of taking over, and targets 15 billion ringgit ($3.5 billion) in revenue in 2025.
Plans for a listing or possible listing of its units are on the cards in three to five years, they said.
Ravindran said the firm is banking on pent-up travel demand when the coronavirus is contained. “Regardless of how long (the virus) will take this year, we are looking at an uptick in the business from summer 2021.”
($1 = 4.3450 ringgit)
(Reporting by Liz Lee; Editing by David Holmes and Edwina Gibbs)
WASHINGTON, April 6 (Reuters) – RavnAir Group, the largest regional carrier in Alaska, filed for bankruptcy Sunday and grounded all of its 72 planes as it waits on a decision from U.S. Treasury for government assistance.
The Trump administration is weighing applications from numerous airlines as it considers how to disburse $25 billion in passenger airline grants, $4 billion for cargo carriers and $3 billion for airport contractors. Congress approved the bailout funds to help air carriers cover payroll costs.
RavnAir, which filed for Chapter 11 bankruptcy protection in Delaware, said Sunday it was suspending all operations and laying off all employees.
“We took these actions to ensure our airline has a future, and to give us time to ‘hit pause'” while it seeks Treasury grants and “other sources of financial assistance that will allow us to weather the coronavirus pandemic and emerge successfully once it has passed.”
In a letter posted Sunday, RavnAir Chief Executive Dave Pflieger said the airline was working to “resume the vital air service you depend on to get home to your families, to your businesses, to medical appointments, and to other duties that are essential to our communities and the state of Alaska.”
Delta Air Lines Inc, American Airlines Group Inc , Spirit Airlines Inc, Southwest Airlines Co , United Airlines Holdings Inc and JetBlue Airways Corp are among the airlines that confirmed they filed before a Friday deadline set by Treasury to get speedy consideration.
On Sunday, top Democrats including House Speaker Nancy Pelosi and Senator Charles Schumer urged Treasury Secretary Steven Mnuchin to move quickly and not impose unreasonable conditions on the grants. Airline unions and many Democrats object to Treasury demanding significant equity or warrants as a condition to the grants.
(Reporting by David Shepardson; Editing by Lisa Shumaker)
