Australian airlines will receive a $715 million government rescue package in a desperate effort to keep them afloat through the coronavirus crisis

Australian airlines like Qantas will be effectively bailed out with $715 million of taxpayer money. (Photo by Randy Shropshire, Getty Images for Qantas)
  • On Wednesday, the Australian government announced a $715 million bailout for the country’s airlines to keep them afloat.
  • The federal government will waive all fees and levies which otherwise would be owed, and will reimburse the airlines the $159 million collected from them since 1 February.
  • Critics of the package, however, point to multi-million dollar executive pay packets as well as stock buybacks that those airlines have engaged in as reason not to gift them taxpayer funds.
  • Visit Business Insider Australia’s homepage for more stories.

There are few industries doing it tougher than the aviation industry right now.

Countries around the world have imposed travel bans, visitors are being forced into 14-day self-isolation, and the Australian government is urging Australians abroad to come home and those here to stay put. In short: it’s bad for business, made obvious by local airlines Qantas and Virgin Australia all but halting their operations for the foreseeable future.

In an effort to relieve a small quantum of that pain, they’re to receive what essentially amounts to a $715 million bailout package, as the federal government waives all the industry fees and levies they typically pay, including the fuel excise.

“Our response today demonstrates our commitment to supporting the aviation sector as we put Australia in the best position possible to deal with the COVID-19 outbreak,” Infrastructure Minister and Deputy Prime Minister Michael McCormack said in a statement outlining the package.

“Our airlines run on tight budgets at the best of times and these past few weeks have been particularly tough. I’ve been speaking with Australian airline executives every day and will continue to work with them to make sure they receive the support they need.”

Of the total, airlines are expected to receive $159 million up-front as reimbursement of fees charged since the beginning of February.

It’s one of the first sector-specific measures the government has announced since revealing it would be looking at providing relief to those hardest hit by the coronavirus fallout. With warnings emerging this week that most airlines around the world could be bankrupt in two months, the aviation industry certainly meets that standard.

“As the impact of the coronavirus and multiple government travel reactions sweep through our world have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants,” the Australia-based CAPA Centre for Aviation said on Sunday.

“Cash reserves are running own quickly as fleets are grounded and what flights there are operate much less than half full,” it warned. “Demand is dying up in ways that are completely unprecedented Normality is not yet on the horizon.”

That’s not to mention the fact that other Australian industries hurting, such as tourism, rely heavily on those same airlines now receiving relief.

“Providing this assistance not only helps our airlines but also the entire aviation industry, regional Australians in particular and other industries such as tourism and trade, which depend on aviation,” McCormack said.

However, the decision is far from uncontroversial. As Business Insider pointed out earlier this week, over the last decade, many global airlines have spent their extra cash on things like stock buybacks and pumping executive pay, leaving them short to deal with crises such as this one.

Qantas did just that last year, finalising its latest buy-back as recently as November. Similarly, CEO Alan Joyce has registered as the highest-paid chief executive in the country, with a total annual remuneration packet exceeding $23 million a year.

Joyce, as a sign of good faith, has offered to forgo some of that given the crisis, but it’s not been enough to quell misgivings about this latest bailout.

At the same time that other industries and households face serious challenges, the relief package has certainly raised a few hackles.