The coronavirus outbreak is shutting down global aviation. Travel restrictions that are suppose to contain the virus means many airlines will need government bailouts within weeks or face bankruptcy.
As measures to contain the outbreak prompt flight bans and wipe out global travel demand, airlines across the world are grounding planes, laying off workers, and scrambling to preserve cash.
Some European airlines are already urgently appealing for help and assistance. The three biggest global airline alliances consisting of oneworld, SkyTeam, and Star Alliance, which represent more than 58 of the world’s leading carriers, urged governments to go all out in assisting the industry from falling apart.
According to a consulting firm, CAPA Centre for Aviation, most airlines in the world will be bankrupt by the end of May unless governments intervene.
“Coordinated government and industry action is needed — now — if catastrophe is to be avoided.”
“Cash reserves are running down quickly as fleets are grounded, and what flights there are operate much less than half full.”
CAPA Centre for Aviation
When Europe’s biggest low-cost carrier, Ryanair (RYAAY), said that it will ground most of its fleet over the next seven to 10 days, the scale of the deepening crisis was truly visible. The airline is now expected to reduce seats capacity by 80% for April and May, and could not rule out complete grounding of its fleet of 470 planes.
“In those countries where the fleet is not grounded, social distancing restrictions may make flying to all intents and purposes, impractical, if not, impossible.”
Ryanair
Scandinavian Airlines said on Sunday that the demand for international air travel is essentially non-existent.
Lufthansa, which owns national carriers in Austria, Switzerland, Belgium, and Germany, said that they are in discussions with respective governments about receiving government support. One of it subsidiaries, Austrian Airlines, is temporarily suspending all of its flights starting March 19.
Reducing Capacity
The airlines industry is in a shambles. Employees have been asked to take voluntary unpaid leaves while senior executives take pay cuts. Adding to the fact that hundreds of planes are lying idle, this is certainly the worst aviation crisis in history.
American Airlines is reducing its international capacity by three quarters between March 16 and May 6 while United Airlines said that it will be cutting capacity in half for April and May. Delta Airlines on the other hand, is reducing its capacity by 40% in the next few months which is considered the largest cut in the company’s history.
Airlines are now relying on Government efforts for financial assistance. The US airlines trade group made an appeal for a federal bailout worth about $50 billion on Monday.
Over in the United Kingdom, Virgin Atlantic has asked staffs to take two months unpaid leave and released a statement on Monday saying that the United Kingdom’s aviation sector alone will need government support of between £5 billion and £7.5 billion ($6.1 billion and $9.2 billion).
In Norway, heavily indebted budget carrier, Norwegian Air said that it needed urgent help from government to strengthen its cash position.
“We welcome the fact that the government has decided to remove aviation taxes in Norway, but sadly, this is not enough as we’re in a very demanding situation at the moment,”
Norwegian Air
The company release a statement saying that it would gradually cancel most of its flights and temporarily lay off 90% of its workforce or about 7,300 people.
“European aviation faces a precarious future and it is clear that coordinated government backing will be required to ensure the industry survives,”
Johan Lundgren, CEO of low-cost carrier EasyJet (ESYJY)
The International Air Transport Association (IATA), said that airlines will need emergency measures to get through the crisis urging governments to consider extending lines of credit, reducing infrastructure costs and easing taxes.
