Most airlines could go bankrupt by end of May, says CAPA amid coronavirus outbreak

Global aviation consultancy firm CAPA on March 16 took to Twitter to say that if coronavirus infections continue then by the end of May-2020, most airlines in the world will be bankrupt. The global consultancy firm added that a coordinated government and industry action was needed to avoid the catastrophe. This comes as the deadly virus has infected 1,70,027 and claimed the lives of 6,524 people globally. 

In a public statement it said that as the impact of COVID-19  and multiple government travel reactions sweep through the 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. 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.”

Airlines affected globally 

This comes as Texas-based American Airlines Inc on March 14 announced that it plans to cut 75 per cent of its international flights through May 6 and ground nearly all of its widebody fleet. Meanwhile, the US airlines announced additional steps on March 13  to ground planes and curtail executive pay as they prepare for an unprecedentedly bad travel market in the near-term. On the same day, Hawaiian Airlines announced that it will cut capacity by 8 per cent to 10 per cent next month and by 15 per cent to 20 per cent in May as demand for air travel dropped.

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According to reports, the Chinese airlines have reported a combined loss of $3 billion in the month of February due to coronavirus outbreak. Zhang Qing, an official with the Civil Aviation Administration of China while talking to the press said that the overall aviation industry in the country has recorded a loss of $24.59 billion yuan in the month of February due to the COVID-19 outbreak.  

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Last month, Singapore Airlines said that it will temporarily cut flights across its global network, including Mumbai, till May as the deadly coronavirus outbreak has impacted the flight demand to the city-state. According to reports, Vietnamese airlines had endured a loss worth $430 million following travel bans between Vietnam and China. The International Air Transport Association (IATA) has estimated the revenue losses to airlines' passenger business of between $63 billion and $113 billion with the higher figure for a scenario where the COVID-19 spreads more widely around the globe. 

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