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2020.03.17 16:43 GMT+8

COVID-19 Global Roundup: 'Most airlines will be bankrupt in 3 months'

Updated 2020.03.17 18:25 GMT+8
CGTN

Editor's note: This is the fifteenth article in the COVID-19 Global Roundup series. Here is the previous one.

Globally, countries are moving aggressively to contain the spread of the coronavirus, including curfews, military roadblocks, and more drastically with nationwide border shutdowns. The abrupt fracture of international transportation poses significant challenges on the airline business. For their part, the international routes are among the most lucrative.

Due to the impact of the coronavirus and the government's travel restrictions, Centre for Aviation (CAPA) published a report on Monday, warning that by the end of the May "most airlines in the world will be bankrupt."

"Many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants," CAPA added.

A screen displays the departure flights information at Malpensa airport near Milan, Italy, March 9, 2020. /Reuters

On Monday, the European Union considered the drastic step of suspending nonessential incoming travel for at least 30 days to combat the pandemic.

President of the EU Commission Ursula von der Leyen announced that EU is set to shut down all Schengen Area Borders, which would cover 30 European countries, all EU member states except Ireland, plus the four non-EU countries that are part of the Schengen border-free zone.

Before that, at least eight EU states unilaterally shut out foreign nationals or partially closed their borders to one or more neighboring country.

Meanwhile, the Trump administration extended the travel ban between the U.S. and European countries on Monday to include the UK and Ireland, one week after the former contingency plan was announced during a national address.

Related readings:

'We are at war': Macron announces 15-day lockdown over COVID-19

Canada closes borders to non-citizens, France expands restrictions

According to the Financial Times, major airlines have introduced drastic measures to cut costs in order to bandage companies' bleeding, including major airlines like United Airlines, British Airways, Aer Lingus and Iberia — Air France-KLM, easyJet, Finnair, Air New Zealand, and the Russia airline Aeroflot, after more countries closed their borders.

The three global airline alliances, Oneworld, SkyTeam and Star Alliance, representing some 60 of the world's air carriers, more than half of global airline capacity, made an unprecedented and urgent plea for government assistance.

The group, Airlines For America, said earlier in the day that it was requesting nearly 60 billion U.S. dollars in direct assistance and loan guarantees, vastly dwarfing the 15 billion made available after the attacks of September 11, 2001. The group also asked for tax relief to the industry, underlined the situation contained more uncertainty than the 9/11 situation.

President Trump expressed his "100%" support to the airline industry on Monday saying the government was weighing the recommendations in a 50 billion-plus U.S.-dollar-aid package from an industry trade group, as the coronavirus pandemic forces air travel to a halt.

The gesture stanched the loss of some airlines, but still faintly. United Airlines stock (UAL) closed down 14.8 percent but rose 1.5 percent after hours. Delta stock (DAL) closed down 6.6 percent then rose 1.1 percent late. American Airlines stock (AAL) was up 11 percent at the close but dipped 1.1 percent later. Southwest (LUV) lost 9 percent in the regular session then added 2.2 percent after hours.

A man, wearing a protective mask, stands at Madrid's Adolfo Suarez Barajas airport, Spain, March 12, 2020. /Reuters

The thump felt by the big companies also has an impact on people's livelihood, especially those who are directly employed by the industry, including pilots, flight attendants, reservation agents and mechanics.

American airline company Delta said it has seen net bookings fall by 25 to 30 percent and expected the situation to worsen further. The airline is cutting its domestic and international flights, and freezing hiring, offering voluntary leave options to staff and looking at early retirement of older aircraft.

JetBlue, which pulled its first-quarter and 2020 earnings forecast, said the outbreak is expected to make at least a six percentage-point dent in its total revenue per available seat mile in the first quarter.

The carrier was considering voluntary time-off programs for employees, delaying some hiring and increasing the frequency with which it cleans aircraft.

The German carrier Lufthansa is cancelling up to 25 percent of flights across the group up to the end of March and will slash up to half the flights across its stable of airlines from April. Other measures to save the budget include offering staff unpaid leave, reduced hours or bringing forward annual leave.

Malaysia Airlines has also given its staff the option of taking voluntary unpaid leave of five days per month for at least three months as its business takes a hit from the coronavirus outbreak.

"This is in line with (the) reduced operations following a capacity management exercise due to COVID-19," the national carrier's owner, Malaysia Aviation Group, said in a statement.

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