Most Airlines Could Go Bankrupt by End of May Due to Covid-19

By JUICE Malaysia  •  16 Mar 2020 in News

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Travelling is probably the last thing on anyone’s mind right now due to the Covid-19 pandemic. Among the varied industries hit by the sudden lost of volume in sales, the air travel sector is probably affected the worst.

As reported by Bloomberg, an aviation consultant warned that the coronavirus pandemic will bankrupt most airlines worldwide by the end of May, unless governments and the industry take coordinated steps to avoid such a situation.

Many airlines have probably been driven into technical bankruptcy or substantially breached debt covenants already, Sydney-based consultancy Centre for Aviation (CAPA) warned in a statement on Monday (16 March). “Carriers are depleting cash reserves quickly because their planes are grounded and those that aren’t flying are more than half empty,” it said.

“Coordinated government and industry action is needed – now – if catastrophe is to be avoided,” CAPA said. Otherwise, “emerging from the crisis will be like entering a brutal battlefield, littered with casualties.”

CAPA added that most of the biggest carriers in the US, China and the Middle East are likely to survive because of government help or support from their owners.

Flybe, Europe’s biggest regional airline, has already collapsed. Carriers could face as much as US$113 billion in lost revenue this year, according to the International Air Transport Association.

Malaysia Airlines Berhad (MAS) said the Covid-19 pandemic has put the loss-making national carrier at risk of bankruptcy. The Edge reported that Malaysia Aviation Group (MAG) group chief financial officer Boo Hui Yee reportedly told MAS staff that the national carrier was no different than many airlines globally at risk. Last week, the local airline “offered” unpaid leave to all its 13,000 employees effective from this month.

“The situation has deteriorated rapidly over the weekend forcing stricter travel restrictions by governments around the world, hence posing greater challenges in our operations,” Boo was quoted saying.

Earlier this month, MAS’ parent company Malaysia Aviation Group announced a 10% reduction of its senior management salary including their allowances, effective April.

Cover image: AP/REUTERS

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