Aviation body says most airlines could be bankrupt by May
CAPA, an aviation market intelligence body says by the end of May 2020 most of the airlines would be bankrupt. IATA recently had said the virus could take a toll of $113 billion on the industry. Airlines all over the world are battling for survival amidst travel bans and restrictions to prevent the virus from spreading which has resulted in grounding of planes and job cuts.
What the report says ?
The report calls for co-ordinated government and industry action which is needed at a time like this. It predicts many airlines have already gone into technical bankruptcy due to drastic reductions in demand. It says cash has dried up and planes are running either empty or half full. It also adds “Forward bookings are far outweighed by cancellations and each time there is a new government recommendation it is to discourage flying. Demand is drying up in ways that are completely unprecedented. Normality is not yet on the horizon”.
The report highlights the failure of the government to co-operate with each other and that governments are looking at their own self interest with limited or no consultation with other governments and says “Each nation is adopting the solution that appears best suited to it, right or wrong, without consideration of its neighbours or trading partner.”
It adds that the response to the aviation system will be action based and only to a selected few. It repeatedly adds the importance of governments coming together and establishing a common framework with a wider interest.
Who would survive ?
CAPA report states high confidence in Chinese Airlines surviving this as most of them are government supported Airlines. A fact is that around 50% shares of most airlines are down whereas the top 3 Chinese airlines have only lost close to a 10% in shares.
It says UK, US and Gulf carriers would be given the support of their governments while EU would also support selective few. The ones that bear the brunt of the effects the global shutdown has on aviation would be that of private carriers.
What is happening ?
True to its report, Airlines are cancelling flights and grounding aircrafts due to lack of demand which is resulting in loss of jobs worldwide. American Airlines is set to cut its international flights by 75%. In Europe full service airlines such as British Airways is cutting capacity and KLM is set to axe 2000 jobs and low cost airlines such as Norwegian are set to reduce operations and cut jobs while EasyJet might be pushed to ground most of its fleet.