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The Italian government has moved to take control of national carrier Alitalia, which it had an existimg stake in. This follows talk of an AirFrance KLM bailout and warnings by Qantas, American Airlines and United Airlines among others.

Air Alitalia

Airline chiefs around the world have been scrambling to survive as cancellations due to the virus and following US president Donald Trump’s move to block most travel by Europeans to the US have crushed revenues.

The Italian government moved to take full control of Alitalia as the coronavirus outbreak in Europe was forcing it to abandon plans to find a buyer daily Il Messaggero said on Sunday. The government will take control of both Alitalia’s aviation and land operations through a public vehicle, the report said, adding the plan would be implemented “in a short time”.

Rome had previously set a May 31 deadline to complete the sale of the airline, with potential investors asked to submit expressions of interest by March 18. A source with knowledge of the matter told Reuters that Alitalia, which has been struggling for years, was running out of cash, despite an extra 400 million euro injection decided by Rome at the beginning of the year. Transport Minister Paola De Micheli said this month the government wanted to accelerate the sale process following the spread of the virus, which has led to a collapse in air traffic.

 Meanwhile over in Paris Air France KLM is talking about a bailout, the airline is 14.3 per cent state-owned, with senior finance ministry officials saying they were considering loans rather than increasing their shareholding. The French government has already said it would stand behind the airline, which was formed by the merger of Air France and KLM of the Netherlands in 2004.

Bruno Le Maire, the French finance minister, said on Friday that France would “help all companies in which the state has a stake . . . Whatever it costs we will be at their side.”

Any increase in shareholding by the French state would risk increasing tensions with the Dutch government, which last year increased its shareholding to 14 per cent, roughly matching that of the French state’s, in order to protect its national interests.

The British Airways CEO said in a memo to staff  that the current crisis is more serious than “the global financial crisis, the Sars outbreak and 9/11”. It is “a crisis of global proportions like no other we have known,” he added. On the weekend, Virgin Atlantic said the UK aviation industry will need 7.5B pounds in a bailout.

American Airlines announced it was virtually shutting down long-haul international travel.  United Airlines said in a statement Sunday it will cut capacity by about 50% for April and May from Monday, as the airline sees a drop in demand because of the novel coronavirus outbreak. The announcement comes after Delta Airlines announced Friday it would reduce its flight capacity by 40% for the next four months over the outbreak. United said even with the cuts it announced, "we're expecting load factors to drop into the 20-30% range — and that's if things don't get worse."

Airlines don't own planes and the lease payments are still due. It's looking like most global airlines might need bailouts. which are the type of systemic risks the Central Banks are trying to avoid.

From The TradersCommunity News Desk

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