Covid-19 Could Bankrupt Most Airlines By End Of May

Sydney-based consultancy CAPA Centre for Aviation warned in a statement on Monday morning that most of the world’s airlines will be bankrupt by the end of May.

Airline carriers are suspending routes for March, April, and May, and full grounding of fleets have yet to be ruled out as flight restrictions have been placed across the world, spurring a collapse in demand, due to the Covid-19 pandemic.

“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. Cash reserves are running down quickly as fleets are grounded and what flights there are operate much less than half full,” CAPA said.

CAPA said, “demand is drying up in ways that are completely unprecedented. Normality is not yet on the horizon.” It said cancellations among global carriers had been seen in more significant amounts with new flight restrictions coming online.

Henry Harteveldt, a travel industry analyst in San Francisco, tweeted on Sunday evening that a “Growing number of sources within #airlines & DC telling me the WH giving serious consideration to grounding all passenger flights for 14-30 days (cargo would be exempted).”

Growing number of sources within #airlines & DC telling me the WH giving serious consideration to grounding all passenger flights for 14-30 days (cargo would be exempted).

Part of me hopes it is not true, the other part understands why it may need to happen.

Ugh.#coronavirus

— Henry Harteveldt (@hharteveldt) March 16, 2020

Treasury Secretary Steven Mnuchin was heard on Saturday, indicating that the Trump administration is laser-focused on providing relief for airlines and other industries affected by the groundings.

CAPA said, “coordinated government and industry action is needed” to avoid a collapse of the airline industry. Otherwise, “emerging from the crisis will be like entering a brutal battlefield, littered with casualties.”

Airlines, cruise ships, hotels, casinos, and other industries have been the most impacted as the virus outbreak threatens to grind the global economy to a halt.