A scary report reveals that airlines in the world will be bankrupt if the coronavirus emergency continues until May. Only coordinated action by government and industry can save them, global aviation consultancy firm CAPA has said.
Most airlines to face trouble
The international travel business faces a complete shutdown over coronavirus concerns after airlines declared new flight reductions and more countries introduced travel bans and isolation requirements. With this, most airlines in the world are facing budgetary problems.
According to the sources, CAPA- Centre for Aviation has now warned that if the same thing continues till May 2020, most airlines in the world will go bankrupt.
“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,” said a CAPA statement.
A downfall in Travel Demand
Demand for travel has taken a fall since a couple of weeks after countries across the world understood travel advisories and Visa restrictions, focused on preventing the spread of the deadly coronavirus.
According to the CAPA, the demand is exhausting up in totally novel ways, prior bookings are far excelled by cancellations, and cash reserves are going down quickly as fleets are postponed and the operating flights are less than half full.
“As the lockdown continues, few airlines have already forced into technical bankruptcy, or are at least largely in violation of debt agreements,” CAPA has said.
Failure of governments
The firm also alleges the governments for failing to do something about it and while they are engaging with the health challenges of coronavirus, it is clear that there is little chance to act equally.
“Each nation is using the solution that appears best suited to it, right or wrong, without consideration of its neighbors or trading partners,” CAPA said.
The study also observed a fall in passenger count by more than one million in the first two weeks of March 2020 as compared to the same period last year.
The situation is so disturbing that the salaries of the airline corporate officers are also cut by 50 percent.
“Even with those cuts, we’re expecting load factors to drop into the 20-30 percent range — and that’s if things don’t get worse,” United 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. Some survivors are self-evident. Chinese airlines are mostly government-supported, so at least the majors will remain solvent; their share prices reflect this actual and de facto underwriting,” CAPA said.
CAPA has recommended organizations like ICAO, the EU, IATA, the regional aviation organizations and the key aviation nations – should start a discussion towards cooperation and building a 21st-century administration.
“Failure to coordinate the future will result in protectionism and much less competition. It will mostly consist of airlines that are the biggest and the best-supported by their governments,” CAPA added,