More airlines are set to fail in the coming months despite some airlines have been helped not to go bankrupt by strong government support say aviation experts.
Since January this year, 43 commercial airlines have failed, found Travel data company, Cirium. In comparison, 46 and 56 airlines had failed for the entire years of 2019 and 2018 respectively.
According to Cirium’s definition, an airline will be considered to have failed if it has completely ceased or suspended operations.
“Without government intervention and support we would have had mass bankruptcies in the first six months of this crisis. Instead, we have had a manageable number of bankruptcies and very few collapses,” said Brendan Sobie, an independent analyst at Sobie Aviation.
Even before the pandemic hit the world, many airlines were already struggling, and now those have a “better chance at survival” because of government help, Sobie said.
“If there is any silver lining in all of this, it is that things were so bad that governments had no option but to support,” said Rob Morris, global head of consultancy at Cirium.
Morris said that the outlook for the rest of 2020 however is “not encouraging” for the sector despite the financial aid.
“Many airline failures typically occur in the final few months of the year,” he said in an emailed statement to the media. Since most of the revenue is generated in the second and third quarters, therefore the first and fourth quarters are “the hardest”.
He however said that he still did not expect to see mass bankruptcies in the industry. He expects that the number of bankruptcies and collapses should be spread out over a relatively long period of time and therefore be manageable.
“I would typically characterize that airlines spend summers building ‘war chests’ so that they can survive winters,” he added. Currently, it is important for airlines to “survive at any cost” and wait to see whether the summer of 2021 brings them any higher demand.
“With demand recovery in most regions stalled and airlines still struggling with revenue generation and cash outflow, we expect to see more failures in the final quarter of 2020 and first quarter of 2021 at least,” he said.
Some governments may be reluctant to bail airlines out a second time, said Brendan Sobie of Sobie Aviation while agreeing with the prediction.
Morris pointed out that this time bigger airlines are being impacted.
Cirium’s data showed that at least 10 aircraft were operated by 20 airlines out of the 43 airlines that have failed so far in 2020. That number in 12 and 10 in 2019 and 2018 respectively.
“Although we have seen fewer airline failures this year, the number of those airlines failing that operated ten or more aircraft is already greater than we have seen in any of the past six complete years. Thus it is clear that the pandemic is impacting larger airlines and causing them to fail,” Morris said.
(Adapted from CNBC.com)