New Delhi:
Due to the novel coronavirus (COVID-19) pandemic, most airlines in the world will be bankrupt by the end of May and only coordinated action by governments and industry right now can avoid the catastrophe, said global aviation consultancy firm CAPA (Centre for Aviation) in a note on Monday.
"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 stated.
Airlines made unprecedented cuts to flights, costs and staffing on Monday, stepping up calls for emergency aid as coronavirus lockdowns and new travel restrictions hit more major routes.
Already battered shares in British Airways parent IAG , easyJet and Air France-KLM plunged again as they scrapped most flights for the coming weeks, joining other major carriers that are all but halting operations in the face of the pandemic.
"It is now clear that the coronavirus is by far the biggest crisis in the history of aviation," Finnair Chief Executive Topi Manner said, as the carrier announced a 90% capacity reduction and its second profit warning in three weeks.
In an unusual joint statement, the world's three main airline alliances – oneworld, SkyTeam and Star Alliance – called for government aid to alleviate the "unprecedented challenges" faced by the industry.
"Coordinated government backing will be required to ensure the industry survives," easyJet CEO Johan Lundgren said.
Airlines are also likely to postpone new jet deliveries, a prospect weighing on Boeing and Airbus, whose shares were down 18%. Aircraft and engine makers also face a slump in parts and maintenance sales as air traffic withers.
"Demand is drying up in ways that are completely unprecedented," aviation consultant CAPA said in a report, predicting that most global airlines would go bust by June without government help. "Normality is not yet on the horizon."
Across the world, airlines have announced drastic reduction in their operations in the wake of the coronavirus outbreak. For example, Atlanta-based Delta Air Lines stated on Sunday that it would be grounding 300 aircraft in its fleet and reducing flights by 40 per cent.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.
CAPA, in its note on Monday, said, "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."
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.
India's largest airline IndiGo, which has around 260 planes in its fleet, said on Thursday that it has seen a decline of 15-20 per cent in daily bookings in the last few days.
The low-cost carrier had stated that it expects its quarterly earnings to be materially impacted due to such decline.
CAPA said the failure to coordinate the future will result in protectionism and much less competition.
"The alternative does not bear thinking about. An unstructured and nationalistic outcome will not be survival of the fittest. It 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," the consultancy firm said.