Due to the coronavirus pandemic, most airlines in the worldwill be bankrupt by the end of May and only a coordinated government andindustry action right now can avoid the catastrophe, said global aviationconsultancy firm CAPA in a note on Monday.
“As the impact of the coronavirus and multiplegovernment travel reactions sweep through our world, many airlines haveprobably already been driven into technical bankruptcy, or are at leastsubstantially in breach of debt covenants,” it stated.
Across the world, airlines have announced drastic reductionin their operations in the wake of the coronavirus outbreak. For example,Atlanta-based Delta Air Lines stated on Sunday that it would be grounding 300aircraft in its fleet and reduce flights by 40 per cent.
The US has suspended all tourist visas for people belongingto the European Union, the UK and Ireland. Similarly, the Indian government hassuspended all tourist visas and e-visas granted on or before March 11.
CAPA, in its note on Monday, said, “By the end ofMay-2020, most airlines in the world will be bankrupt. Coordinated governmentand industry action is needed – now – if catastrophe is to be avoided.”
Cash reserves are running down quickly as fleets aregrounded and “what flights there are operate much less than halffull”, it added.
“Forward bookings are far outweighed by cancellationsand each time there is a new government recommendation it is to discourageflying. Demand is drying up in ways that are completely unprecedented.Normality is not yet on the horizon,” it said.
India’s largest airline IndiGo — which has around 260planes in its fleet — said on Thursday that it has seen a decline of 15-20 percent in daily bookings in the last few days.
The low-cost carrier had stated that it expects itsquarterly earnings to be materially impacted due to such decline.
CAPA said the failure to coordinate the future will resultin protectionism and much less competition.
“The alternative does not bear thinking about. Anunstructured and nationalistic outcome will not be survival of the fittest.
“It will mostly consist of airlines that are thebiggest and the best-supported by their governments. The system will reek ofnationalism. And it will not serve the needs of the 21st century world. That isnot a prospect that any responsible government should be prepared tocontemplate,” the consultancy firm said.