Battered airlines now facing ‘catastrophe’

Border closures and little demand for air travel are leaving airlines in the cold and some are unlikely to survive the months ahead, experts warned.

Rajiv Biswas, Asia-Pacific chief economist for London-based information provider IHS Markit, said airlines in the region are facing an “Armageddon scenario”.

“Due to the collapse in demand for air travel, Asia-Pacific airlines are drastically cutting back their scheduled flights and grounding part of their fleets,” Biswas said. “Large-scale temporary layoffs of staff in the global and Asia-Pacific airline industry will be inevitable in coming weeks.”

As the coronavirus pandemic sweeps the world to close borders and travel, many airlines will be bankrupt by the end of May, warned the Center for Aviation, or CAPA, a leading global aviation and travel intelligence organization based in Sydney.

CAPA analysts, in a commentary, said that unless there is some sort of coordinated government and industry action, the global aviation sector faces “catastrophe”.

“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,” they said.

“Cash reserves are running down quickly as fleets are grounded, and … demand is drying up in ways that are completely unprecedented.”

Serious trouble

But not everyone is so pessimistic. Geoffrey Thomas, head of the global Airline Ratings agency, acknowledges the sector is in serious trouble, but he expects it will “bounce back”. “It always does,” he said.

“Sure, what we are seeing now is unprecedented, but we will see a bounce back. We did after 9/11 and the Asian financial crisis and will bounce back after this.”

Thomas said talk of many airlines going bust is “not the sort of thing we need right now”.

“Many of the world’s major carriers such as Etihad, Qatar Airways, Air New Zealand, Singapore Airlines and Emirates are government-owned anyway and I doubt their governments will let them go under,” said Thomas.

Already half a dozen European airlines have ceased operations, while many carriers around the world have severely cut back on services and are asking staff to take leave.

On March 17, Australia’s national carrier Qantas and its subsidiary Jetstar announced they will cut their international operations by 90 percent and domestic services by 60 percent.

On Wednesday, Virgin Australia canceled all its international flights.

Emirates has asked workers to take unpaid leave for up to one month, while Hong Kong-based Cathay Pacific Airways has asked staff to take three weeks of unpaid leave, slashed services, grounded aircraft and cut overseas bases.

Singapore Airlines has frozen some hiring, while its executives will take a 10 to 15 percent pay cut.

Recently the International Air Transport Association revised its February outlook for the aviation sector for 2020, warning the financial hit from coronavirus could be as high as $113 billion. On Friday, the IATA had said losses could be as much as $29.3 billion.

 

Source: Chinadaily