March 24, 2020 / 6:18 PM / 9 days ago

Struggling Latin American carriers cut domestic flights as coronavirus spreads

SAO PAULO, March 24 (Reuters) - Latin American airlines, which had already cut the vast majority of international flights, on Tuesday announced dramatic cuts to domestic operations as the coronavirus outbreak spreads through the region and hampers demand.

In Colombia, Avianca Holdings, became the second regional carrier to temporarily shut down all passenger operations, canceling its remaining domestic flights in Colombia at least through April 12.

Panama’s Copa Airlines had been the first regional carrier to make that decision.

In Brazil, the largest domestic carrier, Gol Linhas Aereas Inteligentes, said it will cut 92% of its domestic flights, operating only flights from Sao Paulo to each of the remaining 25 state capitals once per day.

Gol had already canceled all of its international flights.

Domestic flights had become the last line of operations for many Latin American airlines, a region where several nations have shut down their borders. But as the coronavirus spreads - in Brazil cases have tripled in four days - domestic operations are now being curtailed as airlines try to preserve cash.

Brazil’s Abear, which represents the interests of airlines, said each carrier had proposed an “essential schedule” to ensure that no major city is isolated, and that this had been approved by the country’s antitrust regulator, Cade.

“Airlines are burning cash, tens of millions of reais per day,” said Eduardo Sanovicz, the president of Abear.

He added that Brazilian authorities had approved those minimal travel schedules “to guarantee that the entire country remains connected, and we will operate this way from Saturday until mid May.”

Airline workers are also facing further impact, following announcements of widespread salary cuts in the industry.

Brazil’s No. 3 airline, Azul, said on Tuesday that 7,500 employees will be taking unpaid leave, more than half of its total workforce.

Senior managers at Azul, meanwhile, are taking a 25% pay cut.

Overall, Azul is reducing its payroll by 65%, the airline said.

Azul also said it was working to strengthen its cash position by negotiating new payment terms with partners, eliminating non-critical capital expenditures and talking to unspecified banks about “new credit facilities.”

Brazil’s national development bank BNDES is open to providing support for the country’s airlines to restructure but is unwilling to assume any of their debt load, Chief Executive Gustavo Montezano said on Monday.

Reporting by Paula Arend Laier, Tatiana Bautzer and Marcelo Rochabrun; Editing by Steve Orlofsky

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