Bloomberg Businessweek August 10, 202011ILLUSTRATION BY EVA CREMERS. *INCLUDES AIRLINES THAT CLOSED WITHOUT FORMAL PROCEEDINGS. FORECAST INCLUDES AIRLINES IN ADMINISTRATION. DATA: INTERNATIONAL BUREAU OF AVIATIONand some major cities adopting quarantine rules.
The relapse prompted Scott Kirby, chief executive
officer of United Airlines Holdings Inc., to predict
his company’s revenue will plateau at no more than
half of prepandemic levels until a vaccine is widely
available. IATA, which has forecast a record $100 bil-
lion loss for the industry this year and next—three
times the losses after the 2008 economic slump—will
need to revisit that prediction, according to Pearce.
Summer represents the only profitable period
for many carriers even in normal times. But with
the prospect fading for a traffic rebound, a spate
of collapses and bankruptcy filings is inevita-
ble, says Stuart Hatcher at consultant IBA Group.
Compounding the crisis in tourism is the collapse in
business travel, particularly on key routes across the
Atlantic and linking China with Europe, which make
up a major part of full-service airlines’ earnings.
Some 34 carriers have failed so far this year, up
from 27 in 2019 but well short of the 63 that went
under in 2008. Airlines that have folded include U.K.-
based Flybe; SunExpress Deutschland, which car-
ried German tourists to Turkish sun spots; Miami
Air, and the OpenSkies unit of IAG SA, which flew
between Paris and the U.S. Richard Branson’s Virgin
Atlantic Airways Ltd. filed for Chapter 15 bankruptcy
protection in the U.S. on Aug. 4 after telling a London
court it was set to run out of cash next month if a
pending rescue deal isn’t approved. Among other
carriers in administration, Virgin Australia Holdings
Ltd. is being acquired, and two big South American
carriers, Latam Airlines Group SA and Avianca
Holdings SA, are also likely to reemerge.
Collapses have been held back by the ground-
ing of fleets, which stemmed the outflow of cash,
together with governments using furlough programs
to pay wages and injecting billions of dollars via bail-
outs and loans. But Hatcher estimates casualties may
double by yearend. “We expect the next level of
blood to be spilled from September,” he says. “That’s
when airlines take stock of what’s been achieved
over the summer in ticket sales and make a judg-
ment about whether to continue.”
Most devastating for carriers would be a new
wave of infections over the Northern winter, coincid-
ing with the seasonal slump in revenue and a tail-
ing off of government support. Charter carriers,
regional airlines, and operators that primarily serve
leisure destinations are most vulnerable, according
to IBA. Household names will generally endure, with
discounters buoyed by strong cash positions and
national carriers likely to be given further govern-
ment support if they need it, Hatcher says.
Meantime, a clutch of major players is facing
a long slog for survival. Carriers in SoutheastUSINESS
70350 Annual airline
bankruptcies*2005 2020
FORECAST