Coronavirus: Swiss Federal Council examines bridging loans for aviation industry

At its meeting on April 8, 2020, the Federal Council instructed the Department of Finance (FDF) together with the Federal Department of the Environment, Transport, Energy and Communications (DETEC) and the Federal Department of Economic Affairs, Education and Research (EAER) to draft a proposal on providing temporary liquidity support to the Swiss aviation industry, which has been particularly affected by the coronavirus pandemic. The focus is on federal guarantees for airlines; they are subject to strict conditions and are only to be granted if the companies are unable to meet their liquidity needs by any other means.

As with other sectors, the aviation industry has been severely affected by the measures taken to contain the coronavirus pandemic. Aircraft movements at Swiss airports have dropped by more than 95 %. Several players in the Swiss aviation sector are therefore facing liquidity shortfalls. The aviation industry is an economically critical infrastructure: prolonged interruption to Switzerland’s international links would involve substantial economic losses. In Switzerland, more than a third of all exports and around one sixth of all imports are transported via air freight. In terms of full-time equivalents (FTEs), the aviation industry employs over 190,000 people in Switzerland.

At its meeting on April 8, 2020, the Federal Council, in agreement with the cantons, therefore declared its willingness to examine measures to ensure that Switzerland’s international air links are not threatened by the coronavirus pandemic. The prerequisite for any financial support is appropriate burden sharing: the state will play only a secondary role. First and foremost, the airlines and their owners are required to implement all reasonable measures.

Prerequisites for federal aid

The Federal Council instructed the FDF, together with the DETEC and the EAER, to propose measures to ensure the liquidity of the airlines that are economically important for international air links, while taking these prerequisites into account.

The focus is on federal guarantees. These are to be subject to strict prerequisites in order to minimise the risk for the Confederation. This includes proof that all financing possibilities have been exhausted. In addition, funds generated in the future are to be used primarily to repay the liquidity assistance (no dividends or intra-group repayments or transfers until the guaranteed loan has been fully repaid). An additional prerequisite is that the Confederation should be entitled to interest at market rates or other indemnities. Funds guaranteed by the Confederation should also be proportionate to the parent companies’ commitment and should be used solely to secure Swiss infrastructures (no cash outflows to parent companies abroad). Finally, long-term assurances that Switzerland’s international air links will be maintained will also be expected.

Furthermore, the Federal Council has instructed the aforementioned departments to propose measures or any legislative amendments which would ensure that Switzerland’s airports continue to operate without interruption and in an orderly manner.

The departments concerned will draw up a corresponding proposal for the Federal Council by the end of April.