Most global airlines will be bankrupt by the end of May, and the global aviation industry will face "catastrophe" without "coordinated government and industry action," according to analysis from the CAPA Centre for Aviation.
Airlines around the world are slashing capacity as travel restrictions increase, including the United States' addition of the U.K. and Ireland to its traveler ban on Saturday and the European Union's announcement on Monday that all nonessential travel into the region will be restricted for at least 30 days.
"As the impact of the coronavirus and multiple government travel reactions sweep through our world, many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants," according to CAPA. "Cash reserves are running down quickly as fleets are grounded and what flights there are operate much less than half full. Forward bookings are far outweighed by cancellations, and each time there is a new government recommendation, it is to discourage flying."
U.S. carriers largely have shut down long-haul flying. Prior to the EU announcement, Delta had added suspensions of its service between Detroit and London-Heathrow and between New York and Dublin to the deep cuts announced Friday. American Airlines has cut international capacity by 75 percent through May 6. United CEO Oscar Munoz and president Scott Kirby in a letter to employees on Sunday said they were cutting total capacity by about 50 percent for April and May and expect those cuts to extend into the summer travel period.
"Even with those cuts, we're expecting load factors to drop into the 20 percent to 30 percent range—and that's if things don't get worse," Munoz and Kirby said in the letter.
European airlines have announced similar cuts and some, such as the Lufthansa Group's Austrian Airlines, have suspended operations altogether.
OAG analyst John Grant on Monday said that globally, there are 4.5 million fewer seats this week compared with last week, and by next week, the "data snapshot will show a significant reduction week on week, as airlines reach a point where all but the most essential services are dropped in major markets."
CAPA said which airlines survive post-pandemic will vary by region. The major Chinese airlines, for example, are government-supported and will remain solvent, as they already have lost relatively little share price compared with the rest of the world's airlines. The major U.S. carriers also have the clout to lobby for subsidies, with an airline relief package already reportedly included in a stimulus package under discussion in Washington. Gulf carriers and some European carriers also will benefit from owner or government support, but "the prospects for many private airlines are not always as bright," according to CAPA. "The post-coronavirus environment has all the makings of a geopolitical standoff."
As such, if global governments do not coordinate with airlines and each other coming out of the crisis, the industry will be left as one that will "reek of nationalism," CAPA warned. To date, government responses have not been encouraging.
"Each nation is adopting the solution that appears best suited to it, right or wrong, without consideration of its neighbors or trading partners," according to CAPA. "When, for example President Trump peremptorily announced the effective cancellation of airline access to most Europeans, he didn't even advise his European government counterparts in advance, let alone consult with them. Other governments have performed little better."