Most Airlines Around The World Will Go Bankrupt By May Without Govt Intervention: CAPA

In a note on Monday, global aviation consultancy firm CAPA said that most airlines in the world will be bankrupt by the end of May due to the coronavirus pandemic and that only a coordinated government and industry action right now can avoid the catastrophe.

"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," it said.

In the wake of the coronavirus outbreak, airlines have been forced to announce drastic cuts in operations.

According to a PTI report, Atlanta-based Delta Air Lines on Sunday said that it would be grounding 300 aircraft in its fleet and reduce flights by 40 percent.

The US has suspended all tourist visas for people belonging to the European Union, the UK and Ireland. Similarly, the Indian government has suspended all tourist visas and e-visas granted on or before March 11.

Last week, Indian budget airline IndiGo in a stock exchange filing said that it has seen a decline of 15-20 percent in daily bookings and may see more. It expects its quarterly earnings to be materially impacted due to such decline.

"By the end of May-2020, most airlines in the world will be bankrupt. Coordinated government and industry action is needed - now - if catastrophe is to be avoided," CAPA said.

Cash reserves are running down quickly as fleets are grounded and "what flights there are operate much less than half full", it added.

"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," it said.

CAPA said the failure to coordinate the future will result in protectionism and much less competition.

The consultancy firm said that an unstructured and nationalistic outcome will not be survival of the fittest but "will mostly consist of airlines that are the biggest and the best-supported by their governments. The system will reek of nationalism. And it will not serve the needs of the 21st century world. That is not a prospect that any responsible government should be prepared to contemplate."