By the end of May 2020, most airlines in the world will be bankrupt due to the coronavirus (COVID-19) pandemic, unless governments and the industry take action immediately, CAPA – Centre for Aviation said on Monday.
Based in Sydney, CAPA is a leading source of market intelligence for the aviation and travel industry.
According to CAPA, due to the pandemic many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants.
“Cash reserves are running down quickly as fleets are grounded and what flights there are operate much less than half full,” CAPA warns, also underlining that forward bookings are far outweighed by cancellations and each new government recommendation discourages traveling.
Moreover, CAPA says that along with dealing with the health challenges of coronavirus, governments must act cooperatively and not send out “mixed messages” that differ from country to country.
“Each nation is adopting the solution that appears best suited to it, right or wrong, without consideration of its neighbours or trading partners,” CAPA highlights, mentioning President Trump’s cancellation of airline access to Europe without consulting with the European Union.
CAPA underlines that “the fear” is that, as a collapsed airline system is reconstituted, similar national self-interest will prevail.
“That’s important because the aviation industry is about much more than airline health. It is crucial to global communications and trade,” CAPA says.
“Coordinated government and industry action is needed – now – if catastrophe is to be avoided,” according to CAPA.
The International Air Transport Association (IATA) last week estimated that the coronavirus outbreak is expected to cost the airline industry $113 billion in lost revenue from passengers, a forecast that did not include the US clampdown on European travel.