Business

Why have fewer airlines failed in Covid this year than in 2019?

Receive the news on your mobile, click to access the AEROIN channel via Telegram and our profile on Instagram.

A survey of the impact of the COVID-19 pandemic on airlines conducted by Cirium, a company that analyzes aviation market data, found that 43 airlines have gone bankrupt since January 2020, fewer than in previous years to date. See below why this strange result and some of the companies that have succumbed to the crisis.

Image: Jeroen Stroes Aviation Photography from the Netherlands / CC BY

The company’s statement about analytical data, while frightening at first, isn’t much different from data from previous years. In 2019, there were 46 airline bankruptcies, and in 2018 the number reached 56. According to Cirium, a bankrupt company is one that goes completely out of business or goes out of business.

But in a year so devastating for the aviation industry, how do we have data that is not far from the average of previous years?

According to Brenda Sobie of Sobie Aviation (independent air data analyst), this ceasefire is due to the emergency aid from governments to the airlines. “Without government intervention and support, we would have suffered massive bankruptcies in the first six months of this crisis. Instead, we have had a manageable number of bankruptcies and few mishaps. “

Sobie made a very interesting observation, saying that many companies that had struggled to survive before the crisis and were unlikely to survive in 2020 had a “greater chance of survival” due to the arrival of the pandemic and government aid.

Rob Morris, Cirium’s global advisory director, said that given the chaotic situation that emerged with the arrival of the pandemic, governments had no choice and that they were forced to put in place a rescue plan for their countries’ airlines.

On pandemic reflexes in research

However, reading the absolute number of bankruptcies hides a large hole left by the crisis.

Morris points out an important phone call. Of the 43 airlines that failed so far in 2020, 20 are considered large (operating 10 or more aircraft). In 2019, the number of bankruptcies of companies of this size was 12 and in 2018 it was 10.

“Although we’ve seen fewer airline bankruptcies this year, the number of bankrupt airlines operating ten or more aircraft is already higher than it has been in the last six full years. Hence, it is clear that the pandemic is affecting major airlines and causing them to fail. “

This above finding brings a worrying reflection on the number of planes that have been halted due to bankruptcies. To date, around 485 aircraft have been taken out of service this year, up from 431 in 2019 and 406 in 2018.

future

Rob Morris shows pessimism when speaking about the future of airlines after the pandemic. Despite government aid, the outlook for the rest of 2020 is “not encouraging,” said Morris.

According to the expert, airline bankruptcies usually occur in the last months of the year. The first and fourth quarters are considered “the most difficult” as most of the revenue is generated in the second and third quarters.

“I would normally characterize airlines as spending the summer building ‘war boxes’ so they can survive the winter,” he added. The airline’s goal now is to “survive at all costs” and see if summer 2021 brings solutions or greater demand.

It is important to note that Morris is referring to companies in the northern hemisphere where summer is concentrated in the middle of the year and winter is the last and first months of the year.

Rob Morris believes that as demand resumes in the regions, companies will struggle to stay alive and seek cash flow with revenue generation and cash outflow. But even with demand returning, he believes we will see more bankruptcies in the final quarter of 2020 and the first quarter of 2021.

Brenda agreed with Rob’s prediction, adding that some governments may not be ready to bail out airlines a second time.

“But I still don’t expect massive bankruptcies. The number of bankruptcies and collapses must be manageable and also extend over a relatively long period of time. “

The International Air Transport Association (IATA) warned on Oct. 6 that despite the gradual return in demand, the industry will lose around $ 77 billion in the second half of 2020 and will continue to lose an average of $ 5 through 2021 to $ 6 billion per month .

The association had published on its website in July last year that demand in 2019 is not expected to return until 2024.

Below is a list of some airlines that went bankrupt in 2020. For more information on some airline bankruptcies, please click on the ones that have links.

The bankruptcy of an airline, mainly a large one, can have a direct impact on the economy of an entire country, with negative repercussions particularly in the tourism and business travel sectors.

Because of this, some of the companies listed above are still trying to reorganize, sell to shareholders, or even “renaissance” under a different name.

Cirium, a company that analyzes data from the aerospace market, made

Back to top button