Shattered airlines were left counting the cost of government support as countries from the United States to New Zealand set out conditions for bailouts needed to absorb the shock of the coronavirus pandemic, Reuters writes.
Conditions include provisions that loans may convert to government equity stakes, while U.S. airlines cannot increase executive pay or provide “golden parachutes” for two years. Air New Zealand’s bailout also depends on the company suspending its dividend and paying interest rates of 7% to 9%.
New Zealand on Friday offered its national carrier a NZ$900 million ($510 million) lifeline, which Finance Minister Grant Robertson said would help it survive after the government banned all non-resident arrivals to the country.
“That puts us in a very good position over the next several months,” Air New Zealand chief executive Greg Foran told reporters of the loan, which it will not draw down immediately. “We would expect the airline industry will look different at the end of this. Not all airlines are going to survive.”
Under the $58 billion U.S. proposal for passenger and cargo carriers, the U.S. Treasury Department could receive warrants, stock options, or stock.
“We are not bailing out the airlines or other industries – period,” U.S. Senate Appropriations Committee Chairman Richard Shelby said. “Instead, we are allowing the Treasury Secretary to make or guarantee collateralized loans to industries whose operations the coronavirus outbreak has jeopardized.”
Norway will back airlines with credit guarantees worth up to 6 billion Norwegian crowns ($537 million), half of them to Norwegian Air Shuttle ASA. Conditions include raising money from commercial banks and the equity market.
Finland, which owns a 56% stake in Finnair, said it would guarantee a 600 million euro ($645 million) loan for the state carrier. The firm said it was implementing a funding plan that included drawing on available credit lines, sale and leasebacks of planes. Its stock jumped 16%.
The International Air Transport Association (IATA) has forecast the industry will need up to $200 billion of state support, piling pressure on governments facing demands from all quarters and a rapid worsening in public finances as economies slump.
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