October 31, 2020

Most airlines may go bankrupt for COVID-19 by May, analysts say


Most airlines may go bust in late May due to flight cancellations and the drop in passenger numbers caused by the COVID-19 pandemic, analysts at the Center for Aviation (CAPA) said Monday.

“With the impact of the new coronavirus and multiple travel measures by governments around the world, many airlines are likely already in technical bankruptcy, or have at least substantially defaulted on their debt obligations,” CAPA, based in Sydney (Australia).

CAPA, a private body that studies the aviation sector, noted that outside of China, large airlines have lost up to 50% of their value in the stock markets.

Regarding Chinese airlines, the agency specified that they have only lost just over 10% of their market value thanks to government support and despite the fact that the number of passengers fell by 84.5% in February in the Asian giant.

“Liquid reserves are falling rapidly with fleets on the ground and the flights they operate are far less than half,” CAPA said, adding that the cancellations far outweigh the reserves.

CAPA criticized the poor coordination of governments and, in particular, regretted the decision of the President of the United States, Donald Trump, to cancel flights from Europe.

“It did not even inform its European partners in advance, let alone consult with any of them. Other governments have done a little better,” the agency said.

In this sense, he called for greater coordination between governments and airlines, recalling that the “nationalist” strategy will be “catastrophic” for the airline sector and, indirectly, for tourism.

“Tourism and the travel industry (…) have contributed to the formation of 20% of new jobs in recent years, mainly in developing countries,” says the note.

The group defended that aviation is the best sector for governments to start coordination and asked that they not wait for the sector to be “in ashes”.

CAPA’s forecast comes on the same day that the shares of major European airlines slumped in the trading session, hit by travel restrictions, causing demand to drop.

Those affected include Lufthansa and IAG – made up of British Airways (BA), Iberia, Vueling and Aer Lingus and which plans to buy Air Europa.

On Monday, New Zealand airline Air New Zealand announced that it will reduce its capacity by 85% in the coming months and will keep operations to a minimum so that New Zealanders can return to their country and maintain links with Asia and the United States.

Last week, Australian airline Qantas announced a 23 percent reduction in its international flights for the next six months in response to falling demand due to the rapid spread of COVID-19 in Asia, the United States and Europe.

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