Airlines across the globe could be bankrupt by May, warns industry body

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By the end of May 2020 numerous airlines worldwide could be bankrupt, according to an analysis by the Centre for Asia Pacific Aviation.

It has called for urgent coordinated government and industry action to avoid catastrophe in the sector.

"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 in a newsletter to members on Monday.

'Unprecedented'

"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. Demand is drying up in ways that are completely unprecedented. Normality is not yet on the horizon."

The analysis, furthermore, argues that each nation seems to be adopting an individual solution, rather than consulting with neighbours and trading partners. CAPA, for its part, sees the prioritisation of country interests over industry cooperation as an increasing threat for aviation.

"The aviation industry is about much more than airline health. It is crucial to global communications and trade," the aviation body said.

"As things stand, the likely tepid response to the airline crisis will equally be fragmented and nationally based. It will consist mostly of bailing out selected national airlines."

CAPA has called for inter-governmental coordination, saying it is essential for the aviation industry in a post-coronavirus world. It foresees that failure to coordinate the future of aviation will result in protectionism and much less competition.

The International Air Transport Association (IATA) has also warned of extreme pressure on the aviation industry. It has urged governments to prepare for the broad economic consequences of travel restrictions they impose and to respond quickly to the financial frailty of airlines, while also following the recommendations of the World Health Organisation.

'Extraordinary times'

"These are extraordinary times and governments are taking unprecedented measures. Safety — including public health — is always a top priority.

"Airlines are complying with these requirements. Governments must also recognise that airlines — employing some 2.7 million people — are under extreme financial and operational pressures. They need support," Alexandre de Juniac, IATA's director general and CEO, said in a recent statement.

Already early in March, IATA estimated that the coronavirus crisis could wipe out about $113 billion of revenue in the industry. That scenario did not include such severe measures as the US and other governments - including Israel, Kuwait, and Spain - have since put in place.

IATA also says dramatic travel restrictions and collapse of passenger demand have severely limited cargo capacity. IATA calls on governments to take urgent measures to ensure that air cargo will be available to support the global fight against the coronavirus.

"Over 185 000 passenger flights have been cancelled since the end of January in response to government travel restrictions. With this, vital cargo capacity has disappeared when it is most urgently needed in the fight against Covid-19. The world's fleet of freighter aircraft has been mobilised to make up this capacity shortfall. Governments must take urgent measures to ensure that vital supply lines remain open, efficient and effective," urged De Juniac on Monday.

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