Application for Airlines' Bailout Loans Opens

EghtesadOnline: Application for 24,000 billion rials ($136 million) in coronavirus bailout loans for airlines and other aviation sectors opened at the Ministry of Cooperatives, Labor and Social Welfare’s Kara.mcls.gov.ir on June 1.

News ID: ۷۵۰۱۶۵

06 June 2020

The Covid-19 pandemic has had a significant impact on Iran’s aviation industry due to the resulting travel restrictions as well as the slump in demand among travelers, which coincided with the peak travel season in Iran, i.e. Norouz, the Iranian New Year holidays (March 20-April 1).

Official figures say airlines are facing a cash flow crisis as the sector is grounded and travel demand has dropped by up to 90% during Norouz, so much so that some of them claimed they couldn’t pay their staff.

The number of air passengers reduced by 76% and flights by 90% during the Iranian New Year holidays, known as Norouz, according to latest data released by Iran Airports Company.

“The impact of coronavirus has resulted in Iran's 16 airlines losing up to 30,000 billion rials ($170 million) from Feb. 20 to April 8,” secretary of the Association of Iranian Airlines, Maqsoud Asadi-Samani, told Fars News Agency.

The 750-trillion-rial ($4.26 billion) rescue package that the government approved following the outbreak of coronavirus in March included 80,000 billion rials ($454 million) in loans for the transportation sector.

According to Governor of the Central Bank of Iran Abdolnasser Hemmati, the lending rate for the government aid package will be 12% to be repaid within two years.

Commenting on the interest rate, Hemmati said it is reasonable, given the high inflation rate in the country.

“Even if banks set 18% interest on loans, the real interest rate would still be negative when compared to the annual inflation. Any rate below 12% would apparently impose further financial strain on banks,” he said.

Hemmati has said only businesses that did not lay off workers during the corona crisis would be eligible for the loans. He instructed banks to process the loans soon and cut red tape.

By the end of May 2020, most airlines in the world will be bankrupt, said CAPA—a trusted source of market intelligence for the aviation and travel industry.

Stressing that coordinated government and industry action is needed if a catastrophe is to be avoided, British Airways CEO Alex Cruz says the coronavirus crisis is more serious than any previous aviation crisis.

As the impact of the coronavirus and multiple government travel reactions sweep across the world, many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants.

Cash reserves are running down quickly, as fleets are grounded and flights operate less than half their capacity.

Forward bookings are far outweighed by cancellations and each time there is a new government recommendation it is to discourage flying. Demand is drying up in ways that are completely unprecedented. Normality is not yet on the horizon, Aviation24 reported.

Iran Airports Company registered a total of 9,249 takeoffs and landings during the first month of the current Iranian year (March 20-April 19) to register a 70% decline compared with the similar period of last year.

A total of 752,767 passengers were transported during the month under review, indicating an 80% year-on-year decline.

Over 9,080 tons of cargos were handled during the same period, which shows a 79% decrease compared with the corresponding period of last year, according to IAC's latest report published on its website.

A total of 8,855 takeoffs and landings were registered by domestic flights during the one-month period, down 64% YOY. More than 728,860 passengers and 6,213 tons of cargo were transported domestically, indicating a 75% and 76% fall respectively YOY.

On the international front, 394 takeoffs and landings were registered, down by 93% YOY. A total of 23,907 passengers and 2,867 tons of cargo were transported to and from overseas destinations, down 97% and 84% respectively compared with the corresponding period of last year.

Similar to previous IAC reports, Tehran’s Mehrabad International Airport was the busiest Iranian airport during the period under review with 3,573 takeoffs and landings, registering a 46% decline.

The airport handled 302,431 passengers and around 2,480 tons of cargo, both indicating a 52% YOY decrease.

Mashhad International Airport was the second busiest airport with 857 takeoffs and landings, indicating a 59% YOY decrease. It transported 90,521 passengers and 779 tons of cargos, down 63% and 68% respectively year-on-year.

Ahvaz International Airport registered 795 takeoffs and landings (a 29% YOY decrease), while transporting more than 68,809 passengers (a 35% decline) and over 591 tons of cargos showing a 35% decrease YOY. Ahvaz International Airport ranked third on the list of Iran’s busiest airports during the one-month period.

Iran Airports Company is an arm of the Ministry of Roads and Urban Development, which manages 54 airports across the country.