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Published on Monday, March 16, 2020

Airlines ground flights amid warning many could go bankrupt by May



UK airlines are cutting operations as a result of the coronavirus pandemic, amid a warning that many global carriers could go bust unless there is a co-ordinated approach from governments and industry.





EasyJet said it will operate rescue flights for short periods 'where we can' but is halting some operations.


"These actions will continue on a rolling basis for the foreseeable future and could result in the grounding of the majority of the easyJet fleet," the airline said in a statement.


British Airways owner IAG said on Monday coronavirus was 'having a significant and increasingly negative impact' on demand on almost all routes and will reduce year-on-year capacity by 75% in April and May.


IAG chief executive Willie Walsh, who has postponed his planned retirement to see the group through the coronavirus emergency, said: "We have seen a substantial decline in bookings across our airlines and global network over the past few weeks and we expect demand to remain weak until well into the summer. We are therefore making significant reductions to our flying schedules."


Transport Secretary Grant Shapps has said he will meet the transport sector this week, while Virgin Atlantic has told the Government the UK aviation industry needs emergency support up of up to £7.5bn.


Ryanair said restrictions imposed by a growing number of countries will see the grounding of the majority of its aircraft fleet across Europe over the next seven to 10 days. In those countries where the fleet is not grounded, social distancing restrictions may make flying to all intents and purposes, impractical, if not, impossible.


For April and May, Ryanair now expects to reduce its seat capacity by up to 80%, and said a full grounding of the fleet cannot be ruled out.


The airline said: "Ryanair is taking immediate action to reduce operating expenses, and improve cash flows. This will involve grounding surplus aircraft, deferring all capex and share buybacks, freezing recruitment and discretionary spending, and implementing a series of voluntary leave options, temporarily suspending employment contracts, and significant reductions to working hours and payments.


"We are working with our people and our unions across all EU countries to address this extraordinary and unprecedented Covid-19 event, the impact and duration of which is, at this time, impossible to determine."


Industry consultancy CAPA Centre for Aviation warned most of the world's airlines could be bankrupt by the end of May without help from the government and industry.


CAPA said: "Co-ordinated government and industry action is needed - now - if catastrophe is to be avoided.


"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.


"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."


CAA chief executive Richard Moriarty warned: "The threat to the survival of some businesses is real the longer this goes on."


 


 

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