Coronavirus pandemic: Global airlines stare at bankruptcy by May-end amid plunging travel demand, warns CAPA

FP Staff March 16, 2020 11:32:48 IST
Coronavirus pandemic: Global airlines stare at bankruptcy by May-end amid plunging travel demand, warns CAPA

The global airline industry is expected to face its worst crisis even as the coronavirus pandemic is likely to cripple the economic activities across the world, said a news report.

Most airlines in the world will be bankrupt by the end of May 2020 and the world aviation consultancy company Centre for Aviation (CAPA) said that only coordinated action by governments as well as the industry will be able to save the companies.

Coronavirus pandemic Global airlines stare at bankruptcy by Mayend amid plunging travel demand warns CAPA

Representational image. Reuters

With the coronavirus cases spreading, the demand for travel and air travel especially has plunged drastically since the last two weeks after countries across the world implemented travel restrictions to curb further spread of the deadly disease, the report said.

As the situation continues to remain unabated, the number of cancellations are rising more than forward bookings and cash reserves of the airlines are declining amid grounding of the fleet in the wake of thinning passenger numbers, the report said citing a CAPA report.

Early this month, CAPA's chief executive officer and Director of South Asia, Kapil Kaul, had said that travel restrictions would cripple the industry. It will have a 'very serious impact' on airlines with a weaker balance sheet, he said.

"Q1 which was likely to be a period peak travel has already got significantly compromised. A further demand slump is expected in the domestic sector at least in the next few weeks," Kaul said to Firstpost.

On Friday, Australian travel firms had issued profit warnings and Japanese carriers cut capacity, while US airlines rushed to cut flights to Europe in the wake of new travel restrictions.

US travel curbs on much of continental Europe announced by President Donald Trump on 11 March deepened the sector’s misery that began after the virus emerged in China late last year and reduced traffic.

American Airlines Group Inc and United said they would continue normal flights to and from Europe for the next week but would be reducing capacity to Europe by around 50 percent in April.

The International Air Transport Association (IATA), a global industry group representing airlines, called on governments to consider extending lines of credit, reducing infrastructure costs and cutting taxes.

IATA last week estimated that the crisis could wipe out some $113 billion of industry revenue, in a forecast that did not include the US clampdown on European travel.

-- With inputs from agencies

 

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