Aviation stocks nosedive as CAPA warns of impending bankruptcy

Aviation stocks nosedive as CAPA warns of impending bankruptcy

United Kingdom airlines called on the British government to help ensure their survival, while Germany's Tui AG and Scandinavian carrier SAS said they would suspend the vast majority of operations due to the COVID-19 outbreak and apply for government support.

The three biggest global airline alliances - oneworld, SkyTeam and Star Alliance - urged governments to "evaluate all possible means" to assist the industry. Some European airlines have already issued urgent appeals for help.

As 145 countries have been affected by coronavirus, most airlines in the world will go bankrupt by this May end owing to restrictions put in place to prevent its spread, said the Centre for Asia Pacific Aviation (CAPA), a leading aviation consulting group in a report. CAPA said, "If airlines are to survive major catastrophe, then the joint efforts of governments and industry are needed".

As the situation continues to remain unabated, the number of cancellations are rising more than forward bookings and cash reserves of the airlines are declining amid grounding of the fleet in the wake of thinning passenger numbers, the report said citing a CAPA report. Low-priced carrier Ryanair announced Monday that it would ground most of its fleet over the next seven to 10 days. The world's fleet of freighter aircraft has been mobilised to make up this capacity shortfall.

"An unstructured and nationalistic outcome will not be survival of the fittest", CAPA said.

The organisation also said that governments are not thinking about the airlines while attempting to contain the virus. One of its subsidiaries, Austrian Airlines, is temporarily suspending all flights starting March 19.

"The aviation industry is about much more than airline health".

"We call on Congress and the White House to take all measures available to protect the health and payroll of American workers", said Sara Nelson, president of the Association of Flight Attendants-CWA, which represents 50,000 USA flight attendants at 20 airlines, including United.

But government assistance is only half the solution, says CAPA. "That is not a prospect that any responsible government should be prepared to contemplate", the consultancy firm said.

The group employs more than 70,000 people worldwide.

It foresees that failure to coordinate the future of aviation will result in protectionism and much less competition.

The International Air Transport Association said last week that airlines will need "emergency measures to get through the crisis", urging governments to consider extending lines of credit, reducing infrastructure costs and easing taxes. Treasury Steven Mnuchin has claimed that this is not a "bailout" for the travel industry.

Labor unions on both sides of the Atlantic are pleading for governments to step in. United's pilots union said Sunday there will be a "call to action" this week to ask the USA administration to help, while Britain's pilots union said without "significant government support now there may not be a UK aviation industry left".

"We previously stated U.S. airline bankruptcies were unlikely and in the near-term that still remains the case", analysts at Cowen said in a note to clients last week.

"If that is the default position, emerging from the crisis will be like entering a brutal battlefield, littered with casualties".

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