Aviation and travel market intelligence provider CAPA has warned that most of the world’s airlines face bankruptcy within two months, as carriers struggle to adjust schedules in the light of travel restrictions and plummeting demand caused by the coronavirus pandemic.
The organisation said that “many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants”, adding that “cash reserves are running down quickly as fleets are grounded and what flights there are operate much less than half full”.
In the last few days major airline groups including IAG and Air France KLM have announced massive cuts to their schedules over the next few months, while other such as SAS have warned they will need to temporarily lay off 90 per cent of staff, and Virgin Atlantic says it will ground up to 85 per cent of its fleet.
“Forward bookings are far outweighed by cancellations and each time there is a new government recommendation it is to discourage flying,” said CAPA. “Demand is drying up in ways that are completely unprecedented. Normality is not yet on the horizon.”
Last week analysis from the International Air Transport Association (IATA) estimated that coronavirus could cost the global airline industry up to $113 billion, and today the world’s three largest airline alliances have called on governments and stakeholders to take action “to alleviate the unprecedented challenges faced by the global airline industry amid the COVID-19 pandemic”.
The organisation said that “Coordinated government and industry action is needed – now – if catastrophe is to be avoided”, but warned that with governments “grappling with the health challenges of coronavirus, it is clear that there is little instinct to act cooperatively”.
CAPA cited the example of President Trump unilaterally banning travel to the US from 28 European countries, which amounted to “the effective cancellation of airline access to most Europeans”.
“The fear is that, as a collapsed airline system is reconstituted, similar national self-interest will prevail,” said CAPA. “That’s important because the aviation industry is about much more than airline health. It is crucial to global communications and trade.”
To read CAPA’s analysis in full, click here.