Most Airlines Could Be Bankrupt By End Of May Due To Coronavirus, Consultant Warns

Avatar
Written by Ann Brown
airlines
Most airlines could be bankrupt by the end of May due to the coronavirus outbreak, an international aviation consultant warns. Photo by Jack Harner on Unsplash

The skies aren’t all that friendly right now. According to an aviation consultant, the coronavirus pandemic will bankrupt most airlines worldwide by the end of May unless governments step in.

Sydney-based consultancy CAPA Centre for Aviation has warned that many airlines have probably been driven into technical bankruptcy or substantially breached debt covenants already. Carriers are depleting cash reserves faster than normal since their planes are grounded and/or flying more than half empty. They have also drastically reduced fares.

“Coordinated government and industry action is needed now if catastrophe is to be avoided,” CAPA said. Otherwise, “emerging from the crisis will be like entering a brutal battlefield, littered with casualties.”

Airlines have been among the biggest corporate casualties of the coronavirus outbreak as tourism and travel grind to a halt. Carriers from American Airlines Group Inc. to Australia’s Qantas Airways Ltd. have slashed capacity. Some like Sweden’s SAS AB have temporarily laid off most staff. Flybe, Europe’s biggest regional airline, has already collapsed, Bloomberg reported.

The airlines could lose $113 billion in revenue this year, according to the International Air Transport Association.

United Airlines said it will cut capacity in half in April and May, while Delta is reducing capacity by 40 percent in the next few months — the largest cut in the company’s history, CNN reported. Delta is down to one flight a day on five European routes.

And of course, the airline employees are affected. There are about 460,000 jobs in the U.S. airline industry, according to the U.S. Labor Department.

Analysts say in order to stop the bankruptcy of the airlines by May, government bailouts are needed.

To that end, the three biggest global airline alliances (oneworld, SkyTeam, and Star Alliance) have already urged governments to “evaluate all possible means” to assist the industry. The alliances represent more than 58 of the world’s leading carriers combined. 

The U.S. airlines’ trade group appealed to the government for a federal bailout worth about $50 billion on Monday.