BUSINESS

Most airlines may fly into bankruptcy on COVID-19: CAPA

Ground reality:As fleets are grounded, cash reserves are running down quickly.G.P. Sampath Kumar

Ground reality:As fleets are grounded, cash reserves are running down quickly.G.P. Sampath Kumar  

Govt., industry must act in tandem to avoid catastrophe

As of now, 145 countries have been affected by COVID-19 and most airlines in the world will go bankrupt by the end of May 2020 on account of restrictions being put in place to prevent the spread of the virus, said Centre for Aviation (CAPA), a leading aviation consulting group, in a report.

It said co-ordinated government and industry action is now needed “if a catastrophe is to be avoided.”

“As the impact of COVID-19 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, operate 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.

Commenting on the Indian scenario Kapil Kaul, CEO and director, CAPA South Asia, said, “Depending on the extent of the spread of COVID-19 in India, the impact on Indian airlines with weaker balance sheets will be severe.

“More important, raising funds, if required, may be very challenging,” he said.

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