Coronavirus To Bankrupt Most Airlines by End of May

Bloomberg reports that the coronavirus pandemic will bankrupt most airlines worldwide by the end of May unless governments and the industry take coordinated steps to avoid such a situation, an aviation consultant warned.

Many airlines have probably been driven into technical bankruptcy or substantially breached debt covenants already, Sydney-based consultancy CAPA Centre for Aviation warned in a statement Monday. Carriers are depleting cash reserves quickly because their planes are grounded and those that aren’t are flying more than half empty, it said.

“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,” it said.

Most of the biggest carriers in the U.S., China and Middle East are likely to survive because of government help or support from their owners, CAPA said.

Airlines have been among the biggest corporate casualties of the virus outbreak as the coronavirus grinds air traffic to a halt. Carriers from American Airlines Group Inc. to Australia’s Qantas Airways Ltd. have slashed capacity, while some like Sweden’s SAS AB have temporarily laid off most staff. Flybe, Europe’s biggest regional airline, has already collapsed. Carriers could face as much as $113 billion in lost revenue this year, according to the International Air Transport Association.

Richard Branson’s airline Virgin Atlantic is no different. The PM will be told by Virgin Atlantic bosses that the airline industry needs government aid worth up to £7.5bn. It should be noted that for Branson, a billionaire in his own right, to ask for the British taxpayer for a bailout would be one scandal too far. Branson lives offshore, isn’t a UK taxpayer and most of the company is not British owned anyway.

The bailout request from Virgin’s boss will come ahead of what could prove to be the bloodiest week in British aviation history, with British Airways, Virgin Atlantic, easyJet and Ryanair all announcing mass groundings of aircraft and potentially huge redundancies as the COVID-19 crisis escalates.

 

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