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Global Airline Industry Takes a Hard Fall

Without government intervention and support, many airlines are bound to close down and never recover from the loss. Sydney-based CAPA Centre for Aviation says that many airlines will go bankrupt by May, and half of the world’s airlines will close down by the year-end.
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The airline industry faces a dismal two years post-pandemic also, says data research as airlines see a drop of 80 percent in capacity. The International Air Transport Association (IATA) said the sector could lose a quarter of a trillion dollars in revenues this year.

The vibrant, healthy airline industry will lose several years of growth and it could take until 2022 or 2023 before the volume of fliers returns to the levels before the pandemic, according to research firm OAG

Many airlines are fearful of surviving the sharp drop in air travel due to the coronavirus COVID-19 spread that has led to world governments banning or restricting air travel to a bare minimum. Air New Zealand ferried just 165 passengers on 29 flights in a day, and Cathay Pacific carried only 500 plus passengers in a day last week compared to 100,000s before the outbreak of the virus.

American Airlines has cut down nearly 80 percent of domestic flights for April and May, and 90 percent of its international flights. Ryanair in Europe is flying just 20 flights a day, a 99 percent cut from its usual busy schedule.

Airline Industry May Not Recover From the Drop in Business, Say Data Researchers

ForwardKeys, a data research firm, said the number of international airline seats had fallen to 10 million in the week of March 30 to April 5, down from 44.2 million a year ago.

Olivier Ponti, the vice president of ForwardKeys, said to Reuters that the airline industry will not emerge robust in the aftermath of the pandemic, and the air travel markets are sure to take a hit.

“It’s also possible that a number of airlines will have gone bust and uneconomic discounts will be necessary to attract demand back,” he said in a statement.

Global-Airline-Industry

The US government has announced a $50 billion package for the airline industry. The support from governments could come in the form of loans with waivers and through corporate bonds.

With air travel stalled for the moment, half of the world’s fleet was in storage. And with the number of travelers trickling down to barely in 100s, most airlines are flying smaller aircraft. Added to that, industry insiders say the big-bodied jetliners such as the Boeing Co 777 or 787 and Airbus SE A350 or A330, will see deferrals and no buyers in the near future.

“While many of these will be temporary storage, many of these aircraft will never resume service,” Cowen analyst Helane Becker said in a note to clients. “We believe the airline industry will look very different when we get to the other side of this.”

Most Airlines Seek Government Aid 

Most airlines are seeking government help to tide over the bad times. The US government has announced a $50 billion package for the airline industry. The support from governments could come in the form of loans with waivers and through corporate bonds.

“Governments need to ensure that airlines have sufficient cash flow to tide them over this period,” said Conrad Clifford, Asia-Pacific vice president at the IATA.

Without government intervention and support, many airlines are bound to close down and never recover from the loss. Sydney-based CAPA Centre for Aviation says that many airlines will go bankrupt by May, and half of the world’s airlines will close down by the year-end.

Bloomberg has come up with a list of airlines that might go bankrupt due to the fall in passenger traffic during the pandemic. The list includes Pakistan Airlines, Spicejet, AirAsia, Norwegian Airlines, American Airlines, Virgin Australia, Korean Airlines, Skywest, and China Southern Airlines. Bloomberg based this prediction using the Z-score method developed by Edward Altman to determine bankruptcies. The Z-score measures based on liquidity, solvency, profitability, leverage, and the latest performance.

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