Coronavirus Will Bankrupt Most Airlines by May, Report Finds

As the number of COVID-19 cases climbs to more than 182,000, countries around the world are strictly enforcing travel bans and encouraging social isolation to contain the spread of the pandemic. This also means that multiple businesses around the world have already taken a huge hit. A new report by aviation consultancy Centre for Asia Pacific Aviation (CAPA) now says that most airlines around the world will go bankrupt by May unless the governments step in. "Cash reserves are running down quickly as fleets are grounded and what flights there are operate much less than half full," CAPA said in a statement on March 16.

As governments across the US, Europe and Asia advise their citizens to avoid travelling, suspend tourist visas, and ban the entry of all foreign tourists, some of the biggest airline companies have had to ground most of their fleet.

"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," the CAPA statement says.

The CAPA says that the only way to avoid this catastrophe is for governments to work in coordination instead of only protecting the players that are backed by the government. Another suggestion is also to reduce the tax on airline turbine fuel, a measure recommended by Kapil Kaul, CAPA's CEO for South Asia. However, he warns that even reducing the fuel cost may not make up for the slump in demand.

The airline industry has been one of the biggest casualties of the coronavirus pandemic, with carriers from American Airlines Group Inc. to Australia’s Qantas Airways Ltd. to India’s budget airline Indigo sharply cutting down capacity, while others like Sweden’s SAS AB have also had to temporarily lay off a lot of their staff. Meanwhile, in a memo to their staff titled "The Survival of British Airways", Alex Cruz, CEO, warned about job cuts and said they could be "short term, perhaps long term", after BA grounded 75 percent of its fleet. Virgin Atlantic has also taken the decision to suspend four-fifths of its flights and has urged its staff to take eight weeks of unpaid leave, while budget airlines like Ryanair and EasyJet are also grounding most of their fleets.

While this would mean lesser carbon dioxide emissions across the world, according to the International Air Transport Association, it would also mean an estimated loss of about $113 billion in revenue this year.

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