Coronavirus | Following large scale air travel restrictions most global airlines will go bankrupt by May 2020, says CAPA

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

With over 145 countries affected by coronavirus, 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 COVID-19, said Centre for Asia Pacific Aviation (CAPA), a leading aviation consulting group, in a report.

It said coordinated government and industry action is now needed “if catastrophe is to be avoided”.

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

“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 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.

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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 Corona virus 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,” Mr. Kaul said.

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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 Europeans, 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 will offer an opportunity to reframe the foundations of a global airline industry.

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