Most global airlines will be bankrupt by the end of May and
the global aviation industry will face "catastrophe" without
"coordinated government and industry action", according to analysis
from the CAPA Centre for Aviation.
Airlines around the world are slashing capacity as travel
restrictions increase, including the US' addition of the UK and Ireland to its
traveller ban on Saturday and the European Union's announcement on Monday that
all non-essential travel into the region will be restricted for at least 30
days.
"As the impact of the coronavirus and multiple
government travel reactions sweep through our world, many airlines have
probably already been driven into technical bankruptcy, or are at least
substantially in breach of debt covenants," according to CAPA. "Cash
reserves are running down quickly as fleets are grounded and what flights there
are operate much less than half full. Forward bookings are far outweighed by
cancellations, and each time there is a new government recommendation, it is to
discourage flying."
Many carriers in Europe have announced severe cuts to even
short-haul services as border management policies go into effect. Easyjet said
it could be forced to ground the majority of its aircraft, while International
Airlines Group has announced it will reduce capacity across its airlines’
networks by 75 per cent. Some, such as Austrian Airlines, have suspended
operations altogether. The situation has already seen the collapse of UK-based regional
carrier Flybe, which had already been struggling financially but took a detrimental
hit by a drop in demand caused by the outbreak.
OAG analyst John Grant on Monday said that globally, there
are 4.5 million fewer seats this week compared with last week, and by next week
the "data snapshot will show a significant reduction week on week, as
airlines reach a point where all but the most essential services are dropped in
major markets".
CAPA said which airlines survive post-pandemic will vary by region.
The major Chinese airlines, for example, are government-supported and will
remain solvent, as they have already lost relatively little share price
compared with the rest of the world's airlines. The major US carriers also have
the clout to lobby for subsidies, with an airline relief package already
reportedly included in a stimulus package under discussion in Washington. Gulf
carriers and some European carriers also will benefit from owner or government
support, but "the prospects for many private airlines are not always as
bright", according to CAPA. "The post-coronavirus environment has all
the makings of a geopolitical standoff."
As such, if global governments do not coordinate with
airlines and each other coming out of the crisis, the industry will be left as
one that will "reek of nationalism", CAPA warned. To date, government
responses have not been encouraging.
"Each nation is adopting the solution that appears best
suited to it, right or wrong, without consideration of its neighbours or trading
partners," according to CAPA. "When, for example President Trump
peremptorily announced the effective cancellation of airline access to most
Europeans, he didn't even advise his European government counterparts in
advance, let alone consult with them. Other governments have performed little
better."