Airlines sound alarm: ‘by end of May most will go bust’
With the reduction in travel due to the Covid-19 virus outbreak, airlines worry about their imminent future. Some experts foresee a global passenger reduction of 20 to 30% while others say that by the end of May 2020 most airlines will have gone bust. To prevent this worst-case scenario, airlines are calling their governments for help and putting their employees under technical unemployment.
In 2008, banks were crying for help after the global economic crisis. Today, with the coronavirus outbreak, airlines are preparing for the worst. “By the end of May, most airlines will be bankrupt,” alerted market analyst company CAPA. S&P global ratings, for its part, foresees a reduction in passenger count of 20 to 30% and plans for a full recovery only for 2022-2023. Last week, the ITA estimated the cost of the epidemic for airlines at 113 billion dollars.
To face the difficult upcoming months, airlines are preparing to cut some costs. Brussels Airlines already announced its radical take on the matter. All flights will be temporarily canceled from Saturday 21 March 2020 until 19 April. The company is also looking to extend its technical unemployment from 30% of its workforce to 100%.
The Belgian company isn’t alone. German motherhouse, Lufthansa, announced the suspension of 90% of its flights while Austrian goes up to 100%. Air France reduces its offer by 70 to 90% while TUI drops the majority of its activities.
Calling for help
To keep their head above the water, airlines turn to their respective governments and ask for help. Brussels Airlines has already asked the Belgian government for a 200-million-euro help. Lufthansa did the same in Germany while British airlines are calling for more than 9 billion dollars of help.
Moreover, the US air transport sector required urgent help of around 50 million dollars. In Italy, the government has put aside a global envelope of 600 million euros to help its air transport activity, including the possible purchase of Alitalia.
In Russia, the government promised to unlock a 300-billion-ruble budget to support the economy. Measures include some tax report as “there is a high risk of bankruptcy for air transport companies”, according to Alexandre Neradko, head of Rosaviatsia.
As was the case back in 2008, critics are sure to fly if governments accept to help the air transport sector. This help won’t certainly be unanimous among climate defenders, who already have airlines in their line of sight for contributing to climate change.
With numerous governments already threatened of recession, they will be forced to make a choice, and decide which sector requires help. Air transport still remains a heavyweight in the economy, and vital for tourism and sales.