Most airlines may go bankrupt by May without govt action on Coronavirus

NEW DELHI: The Covid-19 pandemic will push most airlines across the globe to bankruptcy by the end of May, aviation consultancy Centre for Asia Pacific Aviation (CAPA) has said.

This comes as the world's three airline alliances together sought support of the governments to tide over the crisis. “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," CAPA said. "Cash reserves are running down quickly as fleets are grounded and what flights there are operate much less than half full.”

It said 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.

CAPA said only a coordinated action by governments and industry can save them. “Coordinated government and industry action is needed – now - if catastrophe is to be avoided,” it said.

The consultancy also cautioned that governments are failing to cooperate and while they are grappling with the health challenges of coronavirus, it is clear that there is little instinct to act cooperatively.

“Each nation is adopting the solution that appears best suited to it, right or wrong, without consideration of its neighbours or trading partners,” CAPA said, citing the US’ travel ban on flights to and from European countries.

CAPA's statement has come at a time when airlines across the globe are cutting flights and grounding aircraft due to various travel restrictions imposed by countries, prompting people to shun their travel plans.

India has also shut itself for foreign nationals as well as Overseas Citizen of India (OCI) cardholders.

Even before the Indian government announced its decision to close the country from Friday, several foreign and international carriers had cancelled over 500 flights to and from India. With the new restrictions in place, airlines have begun to reduce capacity to and from India.

Airlines such as Qatar Airways and Delta Air Lines, besides some African carriers have already reduced capacity into the Indian market while others are reviewing the situation.

The three global alliances — Star Alliance, Oneworld and SkyTeam, which represent almost 60 airlines around the world that contribute more than half of global airline capacity — have called on governments to support the airline industry. “To alleviate the immense pressures faced by airlines in the current operating environment, and in support of IATA’s statement on 12 March, the three alliances urge governments worldwide to prepare for the broad economic effects from actions taken by states to contain the spread of Covid-19, and to evaluate all possible means to assist the airline industry during this unprecedented period,” the three airline alliances said in a joint statement.