Coronavirus will make most global airlines go bankrupt by May: CAPA

Centre for Asia Pacific Aviation said coordinated government and industry action is now needed “if catastrophe is to be avoided”

March 16, 2020 06:05 pm | Updated December 03, 2021 06:47 am IST - MUMBAI

As per CAPA, different governments are failing to cooperate with airlines to stay afloat. (Representational image)

As per CAPA, different governments are failing to cooperate with airlines to stay afloat. (Representational image)

As 145 countries have been affected by coronavirus , most airlines in the world will go bankrupt by this May end owing to restrictions put in place to prevent its spread, said the Centre for Asia Pacific Aviation (CAPA), a leading aviation consulting group in a report.

COVID-19 | Interactive map of confirmed coronavirus cases in India

Coordinated government and industry action was needed “if catastrophe is to be avoided,” it said.

“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. Cash reserves are running down quickly as fleets are grounded and what flights there are operated much less than half full,” CAPA said.

“Forward bookings are far outweighed by cancellations and each time there is a new government recommendation it is to discourage flying. Demand is drying up in ways that are completely unprecedented. Normality is not yet on the horizon,” it added.

Also read | India's coronavirus testing rates are among the lowest in the world

Commenting on the Indian scenario , Kapil Kaul, CEO & Director, CAPA South Asia, said, “The CAPA report is in global context. Depending on the extent of the spread of Coronavirus in India , the impact on Indian airlines with weaker balance sheet will be severe.”

“More important, raising funds, if required, may be very challenging. Reducing Goods & Services Tax (GST) on Aviation Turbine Fuel (ATF) may be critically required but this may not be enough to compensate for a sharp demand slump. At this stage we are now not commenting on the impact in India but it is likely that risks will significantly increase,” he said.

Also read: Spain locks down its citizens, while France shuts nightlife

As per CAPA, different governments are failing to cooperate with airlines to stay afloat. “At a time, while governments are grappling with the health challenges of coronavirus, it is clear that there is little instinct to act cooperatively. Messages are mixed and frequently quite different. Each nation is adopting the solution that appears best suited to it, right or wrong, without consideration of its neighbours or trading partners,” it said.

When, for example President Trump peremptorily announced the effective cancellation of airline access to most European s, he didn’t even advise his European government counterparts in advance, let alone consult with them. Other governments have performed little better, CAPA said.

CAPA said the post coronavirus chaos would offer an opportunity to reframe the foundations of a global airline industry.

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